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5 Winning Sector ETFs as Trump's Tax Reform Turns 6 Months

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Sanghamitra Saha
Cohen & Steers (CNS) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.
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President Trump’s administration passed a tax plan in December that was enacted in January and revolved mainly around corporate tax cuts and personal tax rate adjustment. The plan cuts the corporate rate from 35% to 21% (read: Tax Bill: What ETF Investors Need to Know).

The Trump administration also proposed a move from the current worldwide tax system to a territorial system, allowing companies to send their offshore profits back to the United States without extra taxes.

Last week, the White House called the first major refurbishment of the tax code since 1986 a "celebration" for American workers. Six months have passed since the tax reform got underway. And now it’s the time to look at the ETF winners at the six-month anniversary of the tax overhaul.

Below we highlight a few sector ETFs that have gained considerably in the year-to-date frame (as of Jul 7, 2018).

Invesco S&P SmallCap Health Care Portfolio PSCH – Up 34.5%

Per an article published on Reuters, domestically geared healthcare companies that focus on services are likely to benefit from the lower tax rate. These companies have limited international exposure and considerable capital expenditures, as per the source (read: Here's Why Small-Cap HealthCare ETFs & Stocks Are Good Picks).

The 71-stock fund has a keen focus on Healthcare Equipment, Providers & Services and Biotechnology, which account for about 75% of the portfolio. The Zacks Rank #1 (Strong Buy) fund charges 29 bps in fees (read: 5 American Tech & Small-Cap ETFs Seeing Fireworks This Year).

Amplify Online Retail ETFIBUY – Up 27.2%

This segment was an obvious winner. As retailers were optimistic that the tax plan will lower taxes on middle-income consumers and enable them to spend more money on retail stores, retail ETFs truly gained in this period. Both offline and online retail ETFs beat the S&P 500 this year.

Lower corporate taxes made the likes of Nordstrom, Restoration Hardware, Dick's Sporting Goods and Ulta, see their rate fall from the high 30s to between 22.3% and 24.2%, as quoted on retaildive.com. However, this online ETF exceled this year on consumers’ overall preference for shopping online (read: Why Retail ETFs are Rising This Year).

First Trust Dow Jones Internet ETF FDN – Up 26.3%

Investors should note that tech behemoths hoard huge cash overseas and are poised to benefit the most from Trump's repatriation tax policy. Also, investors can expect higher dividend distribution or share buyback from this move (read: Top-Ranked Sector ETFs to Buy for Q3).

The 42-stock fund has about 70% exposure to information technology stocks. The product charges 53 bps in fees. It has a Zacks Rank #1.

The Obesity ETF (SLIM) – Up 21.7%

The windfall of tax cuts on consumers can be again realized by the strong returns offered by SLIM. The fund tracks the performance of companies globally positioned to profit from servicing the obese. Growing health-conscious among consumers and greater affordability probably have favored the fund (read: Inside the Rise of Thematic ETFs).

Invesco Dynamic Energy Exploration & Production ETF (PXE) – Up 16.7%

The oil and gas industry is another beneficiary of the tax overhaul. As per a source, about 17 American oil and gas companies. including the biggies like Exxon Mobil, Phillips 66, EOG Resources and Chevron, reported a total of $25 billion in direct one-time benefits from the 2017 Tax Cuts and Jobs Act. Many companies will receive hefty income tax refunds this year. This along with higher oil prices boosted PXE. The fund has a Zacks ETF Rank #3 (Hold) (read: Top & Flop ETF Areas of Q2).

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FT-DJ INTRNT IX (FDN): ETF Research Reports
AMPL-ONLN RETL (IBUY): ETF Research Reports
PWRSH-DYN ENRG (PXE): ETF Research Reports
PWRSH-SP SC HCP (PSCH): ETF Research Reports
OBESITY ETF (SLIM): ETF Research Reports
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