4 Outperforming Sector ETFs Over the Past One Month

After a tumultuous ride in January and mid February, the U.S. stocks witnessed the fourth consecutive week of gains on continued signs of improvement in the domestic and international markets. As a result, all the three major indices erased most of the losses made this year, climbing more than 6% over the past one month.

With this, the S&P 500 and Dow Jones are down just over 1% each from a year-to-date look while the Nasdaq Composite Index has shed 5.2%.  
 
Behind the Surge

A spate of stronger U.S. economic data infused enough confidence in the economy, erasing fears of a recession anytime soon. In particular, factory activity contracted less than expected in February, suggesting that beleaguered industry is stabilizing. About half of the industries have shown strength for the first time since August (read: Manufacturing Data Point to Recovery: ETFs, Stocks to Consider).
 
Oil price has stabilized as the global oil glut has eased and the demand-supply trend is improving, thereby giving boost to the battered energy stocks. Notably, U.S. crude has risen 47% from a 13-year low of $26.21 a month ago. The rise in oil price has also calmed fears over the health of banks, especially those that are highly exposed to the energy sector.
 
On the international front, the European Central Bank (ECB) turned more dovish in its meeting last week. The bank cut its deposit rate further by 10% to negative 0.4%, and lowered its refinancing rate and marginal lending rate by 0.5% each to zero percent and 0.25%, respectively. Further, it has expanded its monthly bond buying program from €60 billion to €80 billion (read: Surprise ETF Winners & Losers Post ECB Easing).

Additionally, the People's Bank of China (PBOC) also stepped up its efforts to reinvigorate growth in the economy by fixing the yuan higher against the dollar at 6.4905, the strongest level seen this year.

Investors should note that the Chinese turmoil and oil price slide were the main culprits of a steep downfall early in the year. The receding fears increased the appeal for riskier assets leading to a bullish trend in stocks, though bouts of volatility are still showing up. Given this, we have highlighted four sectors ETFs that easily crushed the broad market funds by wide margins and were the star performers over the past one-month period.

PowerShares S&P SmallCap Energy Fund (PSCE) – Up 34.1%

This fund provides exposure to the energy sector of the U.S. small cap segment by tracking the S&P Small Cap 600 Capped Energy Index. It is less popular and less liquid with AUM of $28.1 million and average daily volume of about 22,000 shares. Expense ratio comes in at 0.29%. Holding 33 securities in its basket, it is concentrated on the top firm with 16% share while other firms hold less than 10% of total assets. About 56.6% of the portfolio is tilted toward energy equipment and services while oil, gas and consumable fuels take the rest. PSCE currently has a Zacks ETF Rank of 5 or ‘Strong Sell’ rating with a High risk outlook (read: 4 Energy ETFs Outperforming on Oil Rebound).
 
SPDR S&P Metals & Mining ETF (XME) – Up 28.0%

The ETF offers a broad exposure to the U.S. metal and mining industry by tracking the S&P Metals & Mining Select Industry Index. Holding 26 stocks in its basket, it uses an equal-weight methodology and does not put more than 6.8% of assets in a single security. In terms of industrial exposure, steel makes up a large chunk at 52.6%, while precious metals and gold mining round out the next two spots with a double-digit allocation each. The product has $314.6 million in AUM and trades in solid trading volumes of around 3.2 million shares per day on average. It charges 35 bps in fees and expenses.

ETRACS ISE Exclusively Homebuilders ETN (HOMX) – Up 24.0%

This is an ETN option offering exposure to the companies that engage in the development and construction of homes and communities by tracking the ISE Exclusively Hombuilders Total Return Index. Notably, the index has 20 stocks in its basket with the largest allocation going to the top four firms with a combined share of 36.2%. The ETN has accumulated nearly $22 million in its asset base since its inception a year ago and trades in a light volume of about 32,000 shares. It charges 40 bps in annual fees and has a Zacks ETF Rank of 4 or ‘Sell’ rating (read: Are Housing ETFs Ready to Ride on Spring Selling Season).
 
PowerShares WilderHill Progressive Energy Portfolio (PUW) – Up 21.1%

This fund provides exposure to 41 companies that focused on alternative energy, better efficiency, emission reduction, new energy activity, greener utilities, innovative materials and energy storage. This is easily done by tracking the WilderHill Progressive Energy Index. The ETF is pretty well spread out across various securities as each makes up for less than 3.7% of total assets. Oil, gas and consumables takes the top spot at 21.2% while electrical equipment and machinery make up for the next two spots with a double-digit exposure each. The fund has amassed $20.4 million in its asset base and sees paltry volume of nearly 5,000 shares a day. Expense ratio came in at 0.70%. PBW has a Zacks ETF Rank of 4.

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PWRSH-SP SC EGY (PSCE): ETF Research Reports
 
SPDR-SP MET&MIN (XME): ETF Research Reports
 
E-TRC ISE EH (HOMX): ETF Research Reports
 
PWRSH-PRG EGY (PUW): ETF Research Reports
 
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