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ETFs to Buy On Alibaba's Blowout Q1 Results

Sweta Killa
Skechers (SKX) delivered earnings and revenue surprises of 13.73% and -3.13%, respectively, for the quarter ended September 2018. Do the numbers hold clues to what lies ahead for the stock?

Chinese e-commerce giant Alibaba Group BABA reported first-quarter fiscal 2018 results after the closing bell yesterday. Earnings of 94 cents per ADS came in much above the Zacks Consensus Estimate of 73 cents. Revenues jumped 56% year over year to $7.4 billion and surpassed our estimate of $7.0 billion. The robust performance was credited to the growing core e-commerce business, booming cloud computing services and strong media and entertainment growth.

Core e-commerce revenue grew 58% year over year, cloud computing revenue soared 96% while digital media and entertainment revenue increased 30%. Mobile monthly active users on its China retail marketplaces increased 24% year over year to 529 million while annual active buyers reached 466 million, up 7% year over year.

Market Impact

Blockbuster earnings have pushed BABA shares up 2.8% to an all-time high. The uptrend is likely to continue given that Alibaba has a Zacks Rank #1 (Strong Buy) with a VGM Style Score of D. However, it has an ugly Zacks Industry Rank in the bottom 33% (see: all the Technology ETFs here).

Given this, ETFs having the highest allocation to this Chinese e-commerce giant will be in focus in the days ahead. Investors should closely monitor the movement in these funds and grab the opportunity when it arises. Most of these ETFs have seen rough trading following Alibaba’s results.

BLDRS Emerging Markets 50 ADR Index Fund ADRE
 
The product offers exposure to the 50 emerging market-based depositary receipts by tracking the BNY Mellon Emerging Markets 50 ADR Index. About 42% of the portfolio is allotted to Chinese firms with Alibaba occupying the top position at 16.1%. Brazil, Taiwan and India round off the next three spots, in terms of country exposure. From a sector look, information technology accounts for 39.8%, followed by financials (16.8%), telecom services (12.9%) and energy (9.2%). ADRE has amassed $151.6 million in its asset base while trades in a light volume of about 8,000 shares. It charges 30 bps in fees per year and lost 0.7% on the day. ADRE has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

iShares MSCI China ETF MCHI

This ETF follows the MSCI China Index, holding 151 securities in its basket. Out of these, Alibaba takes the second spot at 13% share. From a sector look, about 40% of the portfolio is allotted to information technology while financials and consumer discretionary round off the next three spots. The fund has amassed $2.6 billion in its asset base while charging 61 bps in annual fees. Volume is also solid as it exchanges nearly 1.5 million shares in hand on an average daily basis. The ETF is down 1.7% following the results and has a Zacks ETF Rank #3 with a Medium risk outlook (read: China Economic Data Disappoints: ETFs in Focus).

First Trust International IPO ETF FPXI

This product provides exposure to the largest and most liquid companies that are domiciled outside the U.S. by tracking the IPOX International Index. Holding 50 stocks in its basket, Alibaba occupies the top position with 11.3% allocation. About one-third of the portfolio is skewed toward Chinese firms while Japanese firms account for 12.5% share in the basket. From a sector look, consumer discretionary takes the largest share at 21.63%, closely followed by information technology, financials and industrials. The product has been able to manage $18.6 million in its asset base and charges 70 bps in fees per year. Volume is light, exchanging about 9,000 shares in hand on average. It shed 0.2% post Alibaba results and has a Zacks ETF Rank #3 with a Medium risk outlook.

Guggenheim BRIC ETF EEB

This product provides exposure to BRIC countries and follows the BNY Mellon BRIC Select DR Index. In total, it holds 108 stocks with Alibaba at the top position, accounting for 11.6% of assets. About one-fourth of the portfolio is dominated by information technology while energy and financials round off the next two spots with a double-digit exposure each. The ETF has $83.4 million in AUM and sees paltry volume of around 11,000 shares. Expense ratio came in at 0.64%. The fund lost 0.3% on the day and has a Zacks ETF Rank #3 with a Medium risk outlook.

Guggenheim China Technology ETF CQQQ

This fund targets the overall technology sector in China and follows the AlphaShares China Technology Index. Holding 73 stocks, Alibaba occupies the second position in the basket with 11.3% share. In terms of industrial exposure, about 59% of the portfolio is allotted to internet & mobile applications while electronic components, semiconductors, and software programing round off the top four. The product manages an asset base of $161.1 million while trades in a small volume of around 34,000 shares a day. Expense ratio came in at 0.70%. CQQQ lost 1.8% on the day, following Alibaba results and has a Zacks ETF Rank #2 or Buy rating with a High risk outlook (read: Move Over FAANGs: China Tech Stocks and ETFs are the Hottest).

KraneShares CSI China Internet Fund KWEB

This product provides a concentrated exposure to the Chinese internet market by tracking the CSI China Overseas Internet Index. In total, the fund holds 35 securities in its basket with Alibaba occupying the second spot at 9.9%. The technology sector makes up for a substantial 60% of total assets, while consumer discretionary takes the remainder with just 2.5% allotted to industrials. The ETF has amassed $753 million in its asset base and charges 72 bps in annual fees from investors. Volume is good as it exchanges more than 239,000 shares in hand per day. KWEB shed 2% in the last trading session, following the Alibaba earnings announcement, and currently has a Zacks ETF Rank #3 with a High risk outlook.

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