High-Beta ETFs to Bet on Renewed Market Momentum

After a dismal last week, Wall Street regained strong momentum on a vaccination drive with the S&P 500 and Nasdaq Composite index reaching new peaks. This is especially true as the FDA granted full approval to Pfizer PFE and BioNTech's COVID-19 vaccine, which had been under an emergency use authorization since December.

Now, the full approval will help squash the ongoing surge in the COVID-19 Delta variant and lead to a continued reopening of the economy. The FDA move has rekindled the appetite for riskier assets and hopes of a quicker economic recovery. Additionally, strong corporate profit growth has been powering the rally (read: Healthcare ETFs Surge on FDA Full-Vaccine Nod & Deal News).

The strong run is expected to continue going forward given that earnings momentum continues to build up. Additionally, the economy has returned to the pre-pandemic level with the GDP rising 6.5% annually in the second quarter, indicating a sustained recovery from the pandemic-induced recession. Trillions of dollars of government stimulus spending and increased broad-based vaccinations will continue to power consumer spending and result in robust growth. In fact, the United States is projected to see the fastest economic growth in decades this year.

The combination of factors has pushed most analysts to raise the forecast for the S&P 500 for this year. Wells Fargo lifted the target price for the index by 8% to 4,825 through the end of the year while UBS increased the S&P 500 target to 4,600 from 4,500. Goldman, earlier this month, raised the target price to 4,700 from 4,300.

While there are several options to play the bullish backdrop, high-beta ETFs seem a perfect bet at present to make huge profits.

Why High Beta?

Beta measures the price volatility of stocks or funds relative to the overall market. It has a direct relationship with market movements. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile, while a beta of less than 1 indicates that the stock price or fund is less volatile than the market.

That said, high-beta stocks seek to capitalize on consistent growth with market-beating returns. This is because when markets soar, high-beta stocks experience larger gains than the broader market counterparts and thus, outpace the rivals. However, these exhibit a higher level of volatility (read: 5 Hot Equity ETFs of Last Week Amid Volatility).

We have highlighted five high-beta ETFs that could be compelling choice for investors to tap market-beating returns. These funds have AUM of more than $50 million and offers exposure to various sectors:

Invesco S&P SmallCap 600 Pure Value ETF RZV – Beta: 1.72

This fund provides exposure to the pure value segment of the small-cap market by tracking the S&P SmallCap 600 Pure Value Index. It has a well-diversified portfolio of 165 stocks with key holdings in sectors like financials, industrials, consumer discretionary and materials. The product has been able to manage $281 million in its asset and charges 35 bps in fees per year from investors. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Small-Cap ETFs That More Than Doubled in a Year).

Invesco S&P MidCap 400 Pure Value ETF RFV – Beta: 1.66

This fund provides pure exposure to the mid-cap value segment of the U.S. equity market by tracking the S&P MidCap 400 Pure Value Index. With AUM of $157.4 million, it holds 101 stocks in its basket. The product charges 35 bps in fees per year and trades in an average daily volume of 21,000 shares. It has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

Invesco S&P 500 High Beta ETF SPHB – Beta: 1.59

This ETF tracks the performance of stocks from the S&P 500 Index with the highest beta over the past 12 months. It follows the S&P 500 High Beta Index, holding 101 stocks in its basket. More than 41.2% of the portfolio is allotted to information technology while consumer discretionary and energy round off the next two spots with a double-digit allocation. It has AUM of $1.6 billion and 0.25% in expense ratio.

VictoryShares Nasdaq Next 50 ETF QQQN – Beta: 1.53

It offers exposure to the new generation of innovators: 50 stocks that are next in line for inclusion on the Nasdaq-100 Index. The ETF tracks the Nasdaq Q-50 Index, charging investors 29 bps in annual fees. Information technology takes the largest share at 42.5% while consumer discretionary, communication services and healthcare round off the next three spots. QQQN has amassed $142.5 million in its asset base and trades in an average daily volume of 14,000 shares.

Invesco S&P SmallCap 600 Revenue ETF RWJ – Beta: 1.50

RWJ offers exposure to securities of the S&P SmallCap 600 but is weighted by revenues instead of market capitalization. It is home to 594 securities with the key holdings in consumer discretionary, industrials and financials. The ETF has AUM of $623 million and an expense ratio of 0.39%. It trades in an average daily volume of about 57,000 shares and has a Zacks ETF Rank #3 with a High risk outlook.

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Pfizer Inc. (PFE) : Free Stock Analysis Report
 
Invesco S&P MidCap 400 Pure Value ETF (RFV): ETF Research Reports
 
Invesco S&P 500 High Beta ETF (SPHB): ETF Research Reports
 
Invesco S&P SmallCap 600 Revenue ETF (RWJ): ETF Research Reports
 
Invesco S&P SmallCap 600 Pure Value ETF (RZV): ETF Research Reports
 
VictoryShares Nasdaq Next 50 ETF (QQQN): ETF Research Reports
 
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