5 Sector ETFs Beating the Market Halfway Through Q1
After a weak start to 2024, Wall Street regained momentum, with all three major indices logging their fifth straight week of gains. In fact, the S&P 500 topped 5,000 for the first time ever and closed above that level in the latest trading session. The benchmark took almost three years to add 1,000 points after hitting 4,000 level on Apr 1, 2021.
A combination of factors, including a solid earnings season, a resilient economy and a technology surge, powered the rally, resulting in a gain of about 5% for the S&P 500 Index so far this year.
The gains were broad-based and well spread out across various segments. Some of the top performers in the ETF space from different sectors of the market are Roundhill Cannabis ETF WEED, Sprott Junior Uranium Miners ETF URNJ, VanEck Vectors Semiconductor ETF SMH, Range Cancer Therapeutics ETF CNCR and MicroSectors FANG+ ETN FNGS.
Total Q4 earnings of the 285 S&P 500 members that have reported results are up 4.4% from the same period last year on 3.5% higher revenues, with 81.1% beating EPS estimates and 64.6% beating revenue estimates. The 4.4% earnings growth represents the best growth rate since the second quarter of 2022 (read: Should You Be Overwhelmed by Solid Q4 Earnings? ETFs to Play).
The resilience of the U.S. economy has played a crucial role in the S&P 500's ascent, though it has reduced the likelihood of a near-term rate cut. Factors such as robust retail sales, consumer sentiment and a cooling trend in the producer price index indicate the possibility of the Fed achieving a soft landing, bringing inflation back to target without triggering a recession. This economic resilience, coupled with surging shares of big technology companies and optimism over artificial intelligence, has been a significant driver of the market's upward trajectory.
ETFs in Focus
Let’s dig into the details of the abovementioned ETFs:
Roundhill Cannabis ETF (WEED) – Up 40.5%
Cannabis stocks and ETFs have been on a surge since the US Drug Enforcement Administration started reviewing the potential reclassification of cannabis from Schedule I to Schedule III. This development, initiated by a recommendation from the Department of Health and Human Services (HHS), could potentially expand the market for marijuana, which is a multibillion-dollar industry in the United States and a cash crop in many newly legalized states (read: Cannabis ETFs: What's Behind the Latest Surge).
Roundhill Cannabis ETF is designed to offer concentrated exposure to the largest U.S. cannabis companies. The fund may invest in various cannabis-related companies, including cannabis producers and distributors, cannabis-related technology companies and additional cannabis-related ancillary businesses. It offers precise exposure to five leading U.S. MSOs. Roundhill Cannabis ETF has gathered $4.6 million in its asset base so far. It charges 40 bps in annual fees and trades in 6,000 shares a day on average.
Sprott Junior Uranium Miners ETF (URNJ) – Up 17%
The uranium market is getting hotter this year, with price spiking to a new 16-year high on a buying frenzy triggered after Kazatomprom, the world’s largest producer of the radioactive material, warned of supply shortfalls. Renewed interest in nuclear power also added to the strength. Notably, 22 countries, including the United States, UK, Canada and France, have committed to tripling their nuclear capacity by 2050.
Sprott Junior Uranium Miners ETF is the only pure-play ETF focused on small uranium miners selected for their potential for significant revenue and asset growth. It follows the Nasdaq Sprott Junior Uranium Miners Index, which is designed to track the performance of mid-, small- and micro-cap companies in uranium-mining-related businesses. It holds 32 stocks in its basket and charges 80 bps in annual fees. Sprott Junior Uranium Miners ETF has accumulated $350.6 million in its asset base and trades in an average daily volume of 261,000 shares.
VanEck Vectors Semiconductor ETF (SMH) – Up 16.6%
The semiconductor sector is performing well this year, driven by the expansion of artificial intelligence (AI) applications, which are ushering in fresh opportunities for growth within the sector. Additionally, a spate of strong earnings reports from well-known players in the space has instilled confidence in the sector (read: Semiconductor ETFs Look Well Poised Post Q4 Earnings).
VanEck Vectors Semiconductor ETF offers exposure to the companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor production and equipment. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket and has managed assets worth $14 billion. It charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 7.6 million shares per day and has a Zacks ETF Rank #1 (Strong Buy) with a High risk outlook.
Range Cancer Therapeutics ETF (CNCR) — Up 15.2%
The healthcare sector is benefiting from cutting-edge medicines, new drug approvals, technological advancements, deal activities and strong earnings.
Range Cancer Therapeutics ETF offers exposure to a wide range of cancer therapeutic modalities. It follows the Range Cancer Therapeutics Index and holds 82 stocks in its basket, with each accounting for less than 3.7% of assets. Range Cancer Therapeutics ETF has AUM of $15.4 million and charges 79 bps in annual fees. The fund trades in an average daily volume of 8,000 shares and has a Zacks ETF Rank #3 (Hold) with a High risk outlook.
MicroSectors FANG+ ETN (FNGS) – Up 13.5%
The "Magnificent Seven" is the biggest engine of growth for the technology sector and the S&P 500 as a whole. These companies currently account for 30% of the S&P 500 index’s total market capitalization and contributed 53% growth to the S&P 500 this year (read: Tech ETFs Riding the Wave of Strong Earnings).
MicroSectors FANG+ ETN is linked to the performance of the NYSE FANG+ Index, which is equal-dollar weighted and designed to provide exposure to a group of highly traded growth stocks of next-generation technology and tech-enabled companies. The note accounts for a 10% share in each of the stocks. MicroSectors FANG+ ETN has accumulated $252 million in its asset base and charges 58 bps in annual fees. It has a Zacks ETF Rank #3.
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VanEck Semiconductor ETF (SMH): ETF Research Reports
Range Cancer Therapeutics ETF (CNCR): ETF Research Reports
MicroSectors FANG+ ETN (FNGS): ETF Research Reports
Roundhill Cannabis ETF (WEED): ETF Research Reports
Sprott Junior Uranium Miners ETF (URNJ): ETF Research Reports
