With worries over the Fed dialing down for the time being, earnings are once again in focus. This season has been pretty lackluster though, as growth expectations have been muted which has lead to sluggish trading in a number of sectors (read 3 Top Ranked Sector ETFs for Earnings Season).
A few segments have risen above this bearish trend, and proven themselves in this environment despite the headwinds. Below, we highlight two of the biggest winners so far this earnings season—from a sector look—and two ETF choices that can offer top ranked exposure to the trend:
Strength has been expected (and seen) in the financial sector, as the space was projected to account for the bulk of the earnings growth this quarter. In fact, total financial sector earnings are expected to be up 18.6% for the quarter, while estimates continue to surge for the space as well.
The space hasn’t disappointed so far, and many are looking for further strength in many key components thanks to the steeper yield curve and more demand for financial security trading (see 3 Bank ETFs Leading the Pack this Earnings Season).
One way to play this trend is with the ultra-popular XLF, a fund from State Street which holds about 80 financial securities. Currently, the ETF has a Zacks ETF Rank #1 (Strong Buy), and has added about 7.8% in the past one month period.
Aerospace & Defense
A surprise winner this earnings season has been the relatively small aerospace and defense industry. This sector was expected to be hurt by sequestration cuts but it has powered through to give investors solid earnings once more.
In fact, earnings estimate revision ratios have been among the highest in the S&P 500 for both 2013 and 2014, suggesting that the outlook is bright for the space. Commercial orders have also risen, so there is also that as a tailwind in case government issues start to plague the sector (read Time for This Top Ranked Defense ETF?).
A way to target this space with ETFs is via ITA from iShares, an ETF that holds about 25 stocks in its basket. This ETF also has a Zacks ETF Rank of 1, and it has added about 11% over the past month.
For more on these surging ETFs and the trends that make them solid picks, watch our short video on the subject below:
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