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4 Market-Beating Sector ETFs of the First Quarter

Sweta Killa

The Wall Street staged a strong comeback in the first quarter of 2019, buoyed by hopes pinned on the U.S.-China trade deal and the Fed’s dovish outlook that it will not raise interest rates this year. Additionally, expectations for a flourishing U.S. economy and corporate earnings as well as the rebound in oil price added to this uptick though Brexit and fears of a recession in the near-term lingered to unnerve investors in between.

With just a couple of trading sessions left to end the quarter, the Dow Jones is up about 10% while the S&P 500 and Nasdaq have gained 12% and 15.5%, respectively. This marks a spectacular reversal from the meltdown seen in the fourth quarter last year.

While many corners of the equity world witnessed a solid run, a few sector ETFs performed incredibly, thereby comfortably crushing the broader markets. Below, we have highlighted four such funds that have been the quarter’s star performers and could also be winners next quarter if the current trends continue.

ETFMG Alternative Harvest ETF MJ — Up 45.4%

This marijuana ETF has been surging on easing of rules and regulations imposed on the once highly guarded drug — marijuana — for recreational and medical usage. In fact, its popularity has been rising since Canada legalized recreational cannabis last year and became the second country in the world to follow suit on a national level. Additionally, a number of US states joined the race to legalize marijuana. The White House, Congress and U.S. regulators also softened their stance on the drug’s legalization. All these developments in turn, injected strong optimism into the emerging marijuana industry, spurring deal activities. (read: Marijuana ETF Outperforms in Q1: 6 Stocks Leading the Rally).

MJ is the first and the only ETF focusing on the cannabis/marijuana industry. It tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem, benefiting from the global medicinal and recreational cannabis legalization initiatives. The fund holds 37 securities in its basket with higher concentration on the top firms. Canadian firms make up 62% of the portfolio while American firms comprise 24.2%. The ETF has AUM of $1.2 billion and trades in a robust volume of around 945,000 shares. It charges 75 basis points in annual fees.

ARK Genomic Revolution Multi-Sector ETF ARKG — Up 32.5%

The biotech sector has been on the course of progress amid the ongoing industry consolidation and attractive valuations. Particularly, the surge in demand for artificial intelligence in the advancement of diagnoses and treatment across the health care spectrum has been perking up this ETF higher. This is an actively managed ETF, focusing on the companies likely to benefit from the extension and enhancement of the quality of human and other life by incorporating technological and scientific developments plus improvements and advancements in genomics into their business. The fund holds 33 stocks in its basket with none accounting for more than 11.22% share and has 0.75% in expense ratio. It has accumulated $381.3 million in its asset base and trades in average daily volume of 146,000 shares (read: 4 Best-Performing Sector ETFs of March).

SPDR S&P Oil & Gas Equipment & Services ETF XES — Up 26.4%

Oil price has shown a sturdy rebound this year and recovered about half of the losses made in the final quarter of 2018 despite the rising U.S. shale oil. The real optimism came from OPEC-led fresh crude output cuts and the falling output from Iran and Venezuela due to U.S. sanctions. Additionally, the Fed’s dovish stand, which pushed the U.S. dollar down, led to a spike in the oil price. Notably, a weak dollar made dollar-denominated assets cheap for foreign investors, potentially raising demand for commodities (read: Make the Most of the Oil Rush With These ETFs).

With AUM of $219 million, this fund tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry. It holds 42 securities in its basket and charges 35 bps in annual fees. The fund trades in a solid average daily volume of 1.6 million shares and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.

Invesco DWA Technology Momentum ETF PTF

The technology sector has been the biggest beneficiary of the broad market rally, driven by the anticipation of a trade treaty and the Fed’s more dovish-than-expected view. In fact, PTF, which provides exposure to the companies with relative strength (momentum), has been leading with 5.1% gains. It follows the Dorsey Wright Technology Technical Leaders and holds 36 securities in its basket with each contributing not more than 5% of the assets. This ETF is illiquid and relatively unpopular with AUM of $144.6 million and average daily volume of 14,000 shares. It charges 60 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Tech ETFs Soaring to All-Time Highs).