NorthCoast Asset Management ETF retirement portfolios dazzled in Q3. Top equity holdings hit new 52-week highs on favorable economic signals both in the U.S. and abroad. NorthCoast expanded its exposure to surging Canadian equities and maintained sizable positions in European ETFs, which have been on a hot streak. Here are some highlights from the portfolios for Q3:
[ibd-display-video id=2324810 width=50 float=left autostart=true] NorthCoast saw its stakes in iShares MSCI Eurozone ETF ( EZU ) continue to gain ground in Q3. EZU has rallied 23.5% since the start of the year. “Pessimism toward Europe and a lot of optimism toward the U.S. had generated a performance gap and pent-up demand from investors waiting for a revival of European equities,” said Patrick Jamin, chief investment officer for NorthCoast. “There has been strong economic growth in the eurozone and investors have been piling on that trade. The eurozone has seen its biggest expansion in manufacturing activity since 2011.”
See A Table Of NorthCoast ETF Positions
Jamin exited iShares MSCI United Kingdom ETF ( EWU ) in the third quarter as growth prospects dimmed. “We are seeing the projection for GDP for the U.K. for the year at 1.6%, which is down from 1.8% last year,” he said. “Post-Brexit projections have added uncertainty not only on the part of investors, but also on the part of economic participants.”
EWU shares have risen 12.6% so far this year.
NorthCoast added to iShares MSCI Canada ETF ( EWC ) positions during the quarter. “Economic growth in Canada has been pretty robust” Jamin said. “GDP growth accelerated in Q2 to an annualized rate of 4.5%. Consumer spending has improved and there has been a sharp uptick in exports. PMI has been above 50 for fifteen straight months, which is impressive.”
Shares of EWC gained 8.0% during the quarter and are up 10.3% year-to-date.
IShares Core S&P 500 ETF ( IVV ) remained a top holding of ETF retirement portfolios in Q3. The commitment has paid off as IVV has climbed 11.9% in 2017. Jamin and his team see mixed signals for this holding going forward. “Our model is cautiously bullish,” he said. “Technical signals are very positive, but valuations are stretched and sentiment is beginning to taper. The ability of consumers to continue to push economic expansion in the U.S. is likely to come to an end as real job growth has been slowing. We are getting closer to full employment, but salary and income growth have not kept up.”
International Government Bonds Show Promise
NorthCoast had been eyeing iShares International Treasury Bond ETF ( IGOV ) for some time and found an entry point in Q3. “It has been in our universe for quite a while, but had not been liquid enough,” Jamin said. “Liquidity has improved recently, which made entry more feasible. Its macro, technical and sentiment signals have all been positive in our models.”
IGOV is up 9.1% year-to-date.
Jamin trimmed positions in iShares MBS ETF (MBB) to make room for IGOV. “Its macro, valuation and sentiment signals were in negative territory in our models,” he said. “Mortgage rates have not been rising as fast as investors have expected. Refinancing and prepayment risks are becoming more prevalent.”
Shares of MBB have ticked up 0.7% in 2017.
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