5 Growth ETFs at New Highs to Start 2H
Growth investing made a strong comeback and outperformed in the first half of 2023, given the renewed appeal for riskier assets. This is especially true as iShares S&P 500 Growth ETF (IVW), which targets the growth segment, jumped nearly 21.1% so far this year, compared with a gain of about 12.2% for its value counterpart iShares S&P 500 Value ETF IVE and 16.9% for the broad market fund SPDR S&P 500 ETF Trust SPY.
The blend of robust economic recovery, continued low-interest rates, AI frenzy and strong corporate earnings led to the outperformance and will likely continue to drive the second-half performance (read: Growth ETFs Outshine Value in 1H, Predictions for 2H).
In fact, a few ETFs from the space are hitting a new 52-week high to start the second half. These include Vanguard Mega Cap Growth ETF MGK, iShares Russell 1000 Growth ETF IWF, iShares Russell Top 200 Growth ETF IWY, Schwab U.S. Large-Cap Growth ETF SCHG and iShares Morningstar Growth ETF ILCG. All these funds have a Zacks ETF Rank #2 (Buy), suggesting continued outperformance.
Solid Market Trends
Growth investing will continue to make its way higher as global economies bounce back from the pandemic. Industries like travel, leisure and consumer discretionary, which experienced substantial setbacks during the pandemic, are poised to capitalize on pent-up demand. This resurgence will favor growth stocks in the second half of the year.
Additionally, the U.S. economy has shown resilience in the face of the Fed’s aggressive monetary policy tightening. The increasing demand for digital products and services, coupled with consumers' increased spending, will continue to drive earnings and revenues of many growth-oriented companies.
Despite the fact that the Federal Reserve has raised rates this year, interest rates have largely remained low. Low rates are generally favorable for growth stocks as they reduce the cost of borrowing, often needed to finance the expansion of companies. After a pause in rate hikes in the latest meeting, the Fed has signaled more interest rate increases this year that could hurt economic growth, and in turn could weigh on growth stocks. But the magnitude of rates hikes will be lower. Fed funds futures point to an 88.7% chance the central bank will raise its benchmark rate by a quarter point at its policy meeting this month, according to the CME FedWatch Tool
Notably, Wall Street wrapped up the first half with big gains. The Nasdaq Composite Index was an outperformer, climbing 29% and logging in the best first half in 40 years. The S&P 500 and the Dow Jones gained about 16% and 3%, respectively (read: 5 ETF Zones Primed for 2023 Growth Amid Rate Hike Prospects).
Growth investing focuses on capital appreciation rather than annual income or dividends. It is a stock-buying strategy that aims to profit from companies that grow at above-average rates compared to their industry or the market.
These stocks have more upside potential for the coming months, given a surging stock market and increased likelihood of economic growth. However, these offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility especially compared to value stocks.
Let’s discuss the abovementioned ETFs in detail below:
Vanguard Mega Cap Growth ETF (MGK) – 52-Week High: $236.42, Up 37% YTD
Vanguard Mega Cap Growth ETF tracks the CRSP US Mega Cap Growth Index. It holds 96 securities in its basket, with none accounting for more than 16% of the total assets. It has key holdings in technology and consumer discretionary that account for double-digit exposure each.
Vanguard Mega Cap Growth ETF charges 7 basis points in annual fees and trades in a good volume of around 273,000 shares a day on average. The fund has AUM of $14 billion.
iShares Russell 1000 Growth ETF (IWF) – 52-Week High: $276.14, Up 28.8% YTD
iShares Russell 1000 Growth ETF provides exposure to large and mid-capitalization U.S. equities that exhibit growth characteristics by tracking the Russell 1000 Growth Index. iShares Russell 1000 Growth ETF holds 444 securities in its basket with a tilt toward the information technology sector, while consumer discretionary and healthcare receive double-digit exposure each (read: Nasdaq Celebrates Best First Half in 40 Years: ETFs in Focus).
With AUM of $71.4 million, iShares Russell 1000 Growth ETF trades in heavy volume of around 1.2 million shares a day on average and charges 18 bps in annual fees.
iShares Russell Top 200 Growth ETF (IWY) – 52-Week High: $159.38, Up 32.1% YTD
iShares Russell Top 200 Growth ETF offers exposure to large U.S. companies that are expected to grow at an above-average rate relative to the market. It tracks the Russell Top 200 Growth Index, holding 110 stocks in its basket. iShares Russell Top 200 Growth ETF has key holdings in information technology, consumer discretionary and communications with double-digit exposure each.
iShares Russell Top 200 Growth ETF has amassed $7.1 billion in its asset base and trades in an average daily volume of 217,000 shares. It has an expense ratio of 0.20%.
Schwab U.S. Large-Cap Growth ETF (SCHG) – 52-Week High: $75.22, Up 35.3% YTD
With AUM of $19.3 billion, Schwab U.S. Large-Cap Growth ETF follows the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. It holds 245 stocks in its basket, with a large concentration on the top two firms. From a sector look, information technology takes the top spot at 43.8% share while health care, consumer discretionary and communication services receive double-digit exposure each in the portfolio.
Schwab U.S. Large-Cap Growth ETF charges 4 bps in annual fees and sees an average volume of around 977,000 shares a day.
iShares Morningstar Growth ETF (ILCG) – 52-Week High: $62.40, Up 28.1% YTD
iShares Morningstar Growth ETF tracks the Morningstar US Large-Mid Cap Broad Growth Index. It holds 422 stocks in its basket, with a heavy concentration on the top two firms. Here again, information technology is the top sector with 43% share while consumer discretionary, health care and communication round off the next three (read: Large-Cap Growth ETF Hits New 52-Week High).
iShares Morningstar Growth ETF has amassed $1.8 million in its asset base and trades in average daily volume of 76,000 shares. It charges 4 bps in annual fees.
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SPDR S&P 500 ETF (SPY): ETF Research Reports
iShares Russell 1000 Growth ETF (IWF): ETF Research Reports
iShares S&P 500 Value ETF (IVE): ETF Research Reports
iShares Russell Top 200 Growth ETF (IWY): ETF Research Reports
Schwab U.S. Large-Cap Growth ETF (SCHG): ETF Research Reports
Vanguard Mega Cap Growth ETF (MGK): ETF Research Reports
iShares Morningstar Growth ETF (ILCG): ETF Research Reports
