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6 Sector ETFs Must Buys Now

Sanghamitra Saha
Mutual Fund Report for TRMCX

Now that we are about to draw the curtain on the third quarter of 2017, let’s take a look which sectors are trending in the market and may create a boom going into the fourth quarter. This is especially true given the quarter has been quite eventful with two big hurricanes, lots of merger and acquisitions and geopolitical concerns. Let’s delve a little deeper.

Defense

While North Korea’s habit of launching missiles is not being viewed as a good sign by the world, it is gainful for U.S. defense ETFs. The login is simple. Any chance of a war calls for more weapons and aerospace, which will boost the sector. Moreover, the sector is undergoing inorganic expansion which should go in favor of funds like Zacks Rank #1 (Strong Buy) ETF SPDR S&P Aerospace & Defense ETF XAR (read: 3 Top Ranked Aerospace and Defense ETFs For Your Portfolio).

Housing

The condition of houses in areas ravaged by back-to-back deadly hurricanes is anybody’s guess. While Hurricane Harvey flooded Texas, Irma demolished Florida, though less than expected. So, the need for reconstruction and remodeling of houses will surely boost housing and construction ETFs.

This makes Zacks Rank #2 (Buy) PowerShares Dynamic Building & Construction Portfolio PKB andSPDR S&P Homebuilders ETF XHB top picks (read: Home Retailer ETFs Set to Gain After Harvey).

Auto

Hurricane Harvey dented thousands of new vehicles that were in dealership lots, according to a new analysis from Edmunds. These new cars and trucks perhaps “have to be scrapped” as per the CEO of AutoNation.

The car-shopping website estimates that Harvey affected 366,000 new vehicles across Texas. Since several of these are high-profit trucks and SUVs, the trouble is deep for automakers. So, repurchase of cars will gain traction over the medium term on higher replacement demand for the damaged vehicles.  

AutoNation’s CEO also emphasized that “there will be a substantial snapback either in the fourth quarter or the first quarter of next year because that's the American way.” First Trust NASDAQ Global Auto Index Fund CARZ, a Zacks Rank #2 fund, can thus gain ahead (read: Harvey: Pain or Gain Ahead for Auto Stocks and ETFs?)

Industrials

Manufacturing activity came in the strongest in six years in August, as per a survey. This clearly tells why industrial ETFs like First Trust Industrials/Producer Durables AlphaDEX Fund FXR, a Zacks Rank #2 fund, is our pick (read: Here's an ETF to "Make America Great Again").

Health Care

The health care sector is pretty steady right now with price-gouging issues retreating in the Trump administration. Along with this, mergers and acquisitions, FDA approvals of several key drugs and therapies are also leading the space.  Biotech stocks were hurt the most  among the S&P 500 members last year. This has probably made the space cheap and helped it to be back with a bang. Overall, Zacks Rank #2 Vanguard Health Care ETF VHT should be on investors’ radar (read: Should You Keep Your Portfolio Healthy with Biotech ETFs?)

Semiconductor

By now, everyone is familiar with the stupendous rise of bitcoin. Though several analysts expressed concerns about overvaluation, one thing is for sure that the concept of cryptocurrencies is here to stay. Like bitcoin, ether or etherum is also popular this year.

Now, mining of cryptocurrencies needs the usage of semiconductors. A hardware known as an ASIC (Application-Specific Integrated Circuit) has been designed exclusively for mining bitcoin. This is where semiconductor companies can gain traction.

Plus, the Semiconductor Industry Association (“SIA”) recently announced that global sales of semiconductors were $33.6 billion in July 2017, marking a year-over-year gain of 24% and a sequential rise of 3.1%. All the key geographies registered both year-over-year and month-over-month increases in July. As a result, Zacks Rank #1 (Strong Buy) ETF iShares PHLX SOX Semiconductor Sector Index Fund SOXX definitely deserves a look (read: Here's Why Semiconductor ETFs Could Continue Their Rally).

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VIPERS-HLTH CR (VHT): ETF Research Reports
 
SPDR-SP HOMEBLD (XHB): ETF Research Reports
 
ISHARS-PHLX SEM (SOXX): ETF Research Reports
 
PWRSH-DYN BLDG (PKB): ETF Research Reports
 
FT-INDL/PROD (FXR): ETF Research Reports
 
FT-NDQ GL AUTO (CARZ): ETF Research Reports
 
SPDR-SP AER&DEF (XAR): ETF Research Reports
 
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