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Best Performing Stocks of the Top Sector ETF of September

Sweta Killa

Invesco S&P SmallCap Materials ETF PSCM topped the list of best-performing sector ETFs in September, gaining 8.5%.

The outperformance of the materials sector, which tends to be the most sensitive to global economic growth expectations, came on the back of recovering fundamentals attributable to easing of trade tensions between the two largest economies. President Donald Trump delayed the next planned tariff increase of 5% on $250 billion of Chinese goods by two weeks from Oct 1 to Oct 15 as “a gesture of goodwill” on account of the 70th anniversary of the People’s Republic of China on Oct 1. Meanwhile, Beijing has moved to increase imports of American soybeans, pork and other farm products (read: SOYB ETF in Focus as China Allows New Waivers on U.S. Soybean).

Though both parties have showed a willingness to break the deadlock and are expected to resume talks on Oct 10-11, significant issues linger.

Additionally, the Fed rate cut bodes well for the sector. It has put pressure on the U.S. dollar and has made dollar-denominated materials cheap for foreign investors, raising demand for products that these companies sell. As the sector is heavily dependent on interest rates for capital expenditures, lower rates are a boon.

Let’s take a closer look at the fundamentals of PSCM.

PSCM in Focus

This fund offers exposure to companies that are principally engaged in producing raw materials, including paper or wood products, chemicals, construction materials, and mining and metals. It follows the S&P SmallCap 600 Capped Materials Index, holding 37 securities in its basket with each accounting for less than 6.9% of the assets. From an industrial look, chemicals takes the largest share at 62.4% followed by metals & mining (18.5%) and paper & forest products (14.8%). The fund has AUM of $15.6 million and trades in volume of 2,000 shares a day on average. It charges 29 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Best Sector ETFs of September).

Though most of the stocks in the fund’s portfolio delivered strong returns, a few were up more than 20% in September. Below we have highlighted the five best-performing stocks in the ETF with their respective positions in the fund’s basket:

Best Performing Stocks of PSCM

Olympic Steel Inc. ZEUS: This company processes and distributes metal products in the United States and internationally. It jumped about 34.1% in September. Olympic Steel currently has a Zacks Rank #3 (Hold) and VGM Score of B. The stock makes up for 0.4% share in PSCM basket.

Clearwater Paper Corporation CLW: This company produces and sells private label tissue and bleached paperboard products in the United States and internationally. The stock occupies 1% share in the PSCM portfolio and gained 31.6% this month. Clearwater Paper carries a Zacks Rank #3 and has a VGM Score of A (see: all the Materials ETFs here).

Rayonier Advanced Materials Inc. RYAM: This company manufactures and sells cellulose specialty products in the United States, China, Japan, Europe, Latin America, other Asian countries, Canada, and internationally. The stock has a Zacks Rank #4 (Sell) and VGM Score of B. It delivered incredible returns of 25% this month and makes up 0.6% of PSCM.

Trinseo S.A. TSE: This company manufactures and markets synthetic rubber, latex binders, and plastic products in Europe, the United States, the Asia-Pacific, and internationally. It explores for silver, lead, zinc and copper. The stock climbed about 22.9% this month. It currently carries a Zacks Rank #5 (Strong Sell) and has a VGM Score of A. Trinseo occupies the sixth position in the fund’s basket with 5.1% allocation.

Century Aluminum Company CENX: This company produces standard-grade and value-added primary aluminum products in the United States and Iceland. The stock rallied 21.1% in September and makes up for 0.98% of PSCM’s assets. Century Aluminum has a Zacks Rank #2 (Buy) and a VGM Score of D. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

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