With the U.S. deadlock temporarily abated, the equity markets once again reached their multi-year highs on improving economic conditions and recovering housing fundamentals. A string of Q3 earnings beat also supported the market uptrend (read: 3 Biggest ETF Winners from the 3rd Quarter).
Further, growing assurance over the continuation of the Fed’s bond buying program, at least till the end of this year, encouraged investors’ to put in huge amounts in the global equity markets. The broad U.S. market fund (SPY) has pulled in nearly $5.8 billion for October, closely followed $2.8 billion inflows into iShares Core S&P Mid-Cap ETF (IJH).
Though there have been winners in every corner of the space, a few sectors have easily outpaced the broad market, in the year-to-date period. Below, we have highlighted these sector ETFs that have been the star performers this year and could be better plays as we move towards the end of the year (see: all the Categories ETF here).
The biggest winner in the global space so far this year is definitely the alternative energy world, in particular solar. Most of the gains in this corner of the market came from impressive performances and a strong growth outlook by the major companies.
In addition, demand for photovoltaic cells is rising rapidly with China leading the way higher. Notably, China is expected to account for nearly 30% of the total solar demand next year.
Though both the solar ETFs have provided triple digit returns this year, Guggenheim Solar ETF (TAN) has been the top performer. The fund has attracted $226.10 million in assets so far this year reaching a total base of $385.4 million. It charges investors 70 bps in fees per year while sees good volume of more than 300,000 shares a day.
The product tracks the MAC Global Solar Energy Index, holding 29 stocks in the basket. The ETF puts nearly 51% of assets in top 10 holdings and focuses on small caps as these account for three-fourths share (read: 3 Small Cap Value ETFs Poised to Outperform). Further, American firms dominate the fund’s portfolio with nearly 42%, closely followed by China (27.25%) and Hong Kong (12.58%).
The fund surged nearly 122% year-to-date and still has room for further upside given the bullish trend in the sector. Also, TAN has a Zacks ETF Rank of 2 or ‘Buy’ rating, suggesting that the product would outperform over the next one-year period (read: Inside the Incredible Surge in Solar ETFs).
The biotechnology sector is also performing remarkably well this year on increased mergers and acquisitions, promising new drugs and their approval, ever-increasing health care spending and an insatiable demand for new drugs. Expansion into emerging markets like India, China and Brazil would provide a further boost to the sector going forward.
The top ETF in this space is PowerShares Dynamic Biotechnology & Genome Portfolio (PBE), which is enjoying a rally of over 51% year-to-date (read: Inside Biotech ETFs: Can the Run Continue?). The trend is expected to continue given the Zacks ETF Rank of 1 or ‘Strong Buy’ rating with ‘Medium’ risk outlook for the fund.
This ETF follows the Dynamic Biotechnology & Genome Intellidex Index. The product has a somewhat sparse volume of 44,000 shares a day, but a decent level of about $236 million in assets under management. The fund charges 63 bps in fees and expenses from investors.
Holding 29 stocks, the fund is moderately concentrated on its top 10 holdings at 50% but well spread across market spectrums. Large caps account for 42%, small caps make up for 33% while rest goes to mid caps. The ETF has a certain tilt toward the growth stocks (read: Bet on This Top Ranked Large Cap Growth ETF).
The social media space is back on track and were on fire this year thanks to robust earnings, a bullish outlook, and growing Internet usage (read: Social Media ETF on Fire After String of Earnings Beats).
One great way to play the sector surge is with the Global X Social Media Index ETF (SOCL), which gained immense popularity in recent days. The product has gathered $80 million of capital this year, propelling its total asset base to $95.6 million.
Volume is moderate as it exchanges 82,000 shares in hand on average daily basis. The ETF charges 65 bps in fees and expenses.
The fund tracks the Solactive Social Media Index and holds 27 securities in the basket. The product puts more than 76% of assets in the top 10 firms, suggesting heavy concentration. However, the fund is well spread across large and mid cap stocks with a slight tilt toward growth stocks. In terms of country exposure, U.S. firms take half of the portfolio, closely followed by China (30%) and Japan (7%).
The social media ETF returned over 47% in the year-to-date time frame and currently has a Zacks ETF Rank of 2 or ‘Buy’ rating with ‘High’ risk outlook.
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