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5 Sector ETFs That Beat the Market in the First Half

Sweta Killa

The U.S. stock market made a spectacular reversal this year from the meltdown seen late last year. This is primarily owing to hopes of a trade deal between the two largest economies (United States and China), a dovish Fed and a rebound in oil price. However, increased tit-for-tat tariff threats, rise in the Middle East tension, Brexit, geopolitical disturbance and global growth woes persistently made investors’ jittery.

With just a trading session left to end the first half, the Dow Jones is up about 13.7% while the S&P 500 and Nasdaq have gained 16.7% and 20.1%, respectively (read: 5 High Beta ETFs, Stocks to Ride on Surging Market).

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 first half’s star performers and could also be winners in the second half if the current trends continue.

Invesco Solar ETF TAN — Up 51.7%

This ETF, which offers global exposure to 22 solar stocks, has emerged as an undisputed leader this year so far, driven by a rebound in global solar demand, California’s push to make solar panels, competitive pricing and the potential Chinese subsidies. The strongest-ever solar installation and the exemption of tariff on one type of solar panels also added to this strength. American firms dominate the fund’s portfolio with nearly 47.6% share, followed by China (20.3%) and Spain (7.3%). The product has amassed $349.7 million in its asset base and trades in average daily volume of 158,000 shares. It charges investors 70 bps in fees per year and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: 5 High-Flying Stocks of the Top ETF in 1H).

ARK Genomic Revolution Multi-Sector ETF ARKG — Up 37.7%

The biotech sector has been on the path 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 37 stocks in its basket and has 0.75% in expense ratio. It has accumulated $418 million in its asset base and trades in average daily volume of 149,000 shares.

Invesco DWA Technology Momentum ETF PTF — Up 37.6%

The technology sector has been the biggest beneficiary of the broad market rally, attributable to the anticipation of a trade deal 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 the pack. It follows the Dorsey Wright Technology Technical Leaders Index and holds 39 securities in its basket. This ETF is illiquid and relatively unpopular with AUM of $198.6 million and an average daily volume of 23,000 shares. It charges 60 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: S&P 500 Hits New High: 10 Top-Performing ETFs YTD).

Invesco Aerospace & Defense ETF PPA — Up 30.6%

Aerospace & defense sector stocks have been rising on better-than-expected solid earnings, a host of mergers and acquisitions as well as new contracts. PPA offers exposure to 47 companies involved in the development, manufacturing, operations as well as support U.S. defense, homeland security and aerospace operations. It tracks the SPADE Defense Index, charging 60 bps in annual fees from investors. The fund has so far managed assets of $1 billion while trading in lower average daily volume of about 67,000 shares. It has a Zacks ETF Rank of 2 with a Medium risk outlook (read: Raytheon, United Tech to Merge: Aerospace ETFs in Focus).

Invesco DWA Financial Momentum ETF PFI — Up 29.9%

Financials sector got a boost from the Fed’s patient approach so far this year and the prospect of cutting interest rates. Though the lower interest rates do not bode well for this sector, the Fed statement has led to the long-term bond yields contracting less than the short-term ones, thereby resulting in a steep yield curve. This steepening would bolster profits for banks, insurance companies, discount brokerage firms and asset managers. PFI offers exposure to 42 companies that are showing relative strength (momentum) by tracking the Dorsey Wright Financials Technical Leaders Index. It has gathered $58.4 million in its asset base and charges 60 bps in annual fees. The fund trades in volume of 11,000 shares a day on average (read: Is it Time to Buy Financial ETFs Now?).

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