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Earnings Surprise May Lift Stocks: Buy These Growth ETFs

Sweta Killa

Both the S&P 500 and the Dow Jones Industrial Average are hovering around 1% below their all-time highs, and the Nasdaq Composite is about 2% away from its record. The indices got a fresh lease of lift as the Q3 earnings season kicked off to a strong start lending optimism to the stock market (read: 4 Sector ETFs & Stocks to Bet on Ahead of Q3 Earnings).

This is especially true as 74 of the S&P 500 members that have reported results so far came up with a solid 83.8% beat on earnings and 59.5% beat on revenues though earnings are down 3% from the year-ago period. Market participants are betting on the record-high U.S. indices as about 120 S&P 500 companies, or around 24%, are scheduled to release their results this week. If this batch of companies reports solid earnings topping expectations, the stock market will undoubtedly surge to new highs.

According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Most of the S&P 500 companies like Hasbro HAS, Biogen BIIB, Chipotle Mexican Grill CMG, Procter & Gamble PG, eBay Inc. EBAY, Microsoft MSFT, Northrop Grumman Corporation NOC, Comcast Corporation CMCSA and Verizon VZ, possess the above-mentioned combination.

Additionally, positive developments around Brexit and U.S.-China trade negotiations will likely drive the stocks higher (read: ETFs to See Short-Term Rally on Signs of New Brexit Deal).

If this happens, growth investing would be a better strategy. Growth stocks refer to high-quality stocks that are likely to witness revenue and earnings increase at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. As such, growth stocks tend to outperform during an uptrend. However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility when compared to value stocks.

Given this, we have highlighted a spread of large-cap growth ETFs that have a Zacks Rank #1 (Strong Buy), suggesting their outperformance.

Invesco QQQ QQQ

This fund follows the Nasdaq-100 Index and holds a basket of 103 stocks.

AUM: $76.5 billion
Expense Ratio: 0.20%
Average Daily Volume: 31.9 million shares

iShares Russell 1000 Growth ETF IWF

This ETF follows the Russell 1000 Growth Index and holds 530 stocks in its basket (read: Bet on Top-Notch Sector ETFs & Stocks to Sparkle Q4).

AUM: $44.9 billion
Expense Ratio: 0.19%
Average Daily Volume: 1.4 million shares

Vanguard Growth ETF VUG

This fund tracks the CRSP US Large Cap Growth Index, holding 280 stocks in its basket.

AUM: $42.2 billion
Expense Ratio: 0.04%
Average Daily Volume: 650,000 shares

SPDR Portfolio S&P 500 Growth ETF SPYG
 
This product follows the S&P 500 Growth Index, holding 297 stocks in its basket.

AUM: $5.1 billion
Expense Ratio: 0.04%
Average Daily Volume: 1.3 million shares

Vanguard Mega Cap Growth ETF MGK

This ETF offers diversified exposure to 114 largest growth stocks in the U.S. market by tracking the CRSP US Mega Cap Growth Index (read: ETFs to Buy on Phase 1 of U.S.-China Trade Deal).

AUM: $4.4 billion
Expense Ratio: 0.07%
Average Daily Volume: 168,000 shares

iShares Russell 1000 Growth ETF IWF

This ETF follows the Russell 1000 Growth Index and holds 530 stocks in its basket.

AUM: $44.9 billion
Expense Ratio: 0.19%
Average Daily Volume: 1.4 million shares

Vanguard S&P 500 Growth ETF VOOG

This fund tracks the S&P 500 Growth Index, holding 295 stocks in its basket.

AUM: $2.8 billion
Expense Ratio: 0.15%
Average Daily Volume: 96,000 shares

iShares Russell Top 200 Growth ETF IWY

This fund offers exposure to 119 large U.S. companies whose earnings are expected to grow at an above-average rate relative to the market by tracking the Russell Top 200 Growth Index.

AUM: $1.5 billion
Expense Ratio: 0.20%
Average Daily Volume: 64,000 shares

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