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Industrial ETFs: November Strong


Year-to-date, the Industrial Select Sector SPDR (XLI) is the third-best performer among the nine sector SPDR ETFs trailing only the consumer discretionary and health care equivalents. A simple turn of the calendar could position XLI to end the year as the best SPDR.

Over the past three months, XLI is the second-best SPDR behind the Material Select Sector SPDR (XLB) and with November looming, industrial and materials sector ETFs could be headed for an interesting showdown through year-end. As it is, materials ETFs have a well-documented reputation for soaring in November. [Materials ETFs: Good November Buys]

XLI and rival industrial ETFs are not eleventh month slouches, either. Data from Thackray’s 2011 Investor’s Guide indicate the industrial sector rose in 15 of the 20 Novembers through 2011 with an average gain of 2.1%, making November the third-best month of the year for the sector behind March and December.

In November 2012, the Vanguard Industrials ETF (VIS) was only modestly higher, but that was still better than the 0.5% lost by the S&P 500. Flows data indicate some investors have been preparing for a year-end rally with industrials as XLI has accumulated more than $317 million in new assets since the start of October. [Strong October Inflows to Industrial ETFs]

There is something to rotating discretionary, materials and industrial ETFs into a portfolio at the start of November. S&P Capital IQ notes that strategy is not only less volatile than the broader market, but has outperformed the S&P 500 by 640 basis points per year. [ETFs for Buy in November]

XLI and VIS are up an average of 30.5% year-to-date, but the PowerShares Dynamic Industrials Portfolio (PRN) and the First Trust Industrials/Producer Durables AlphaDEX Fund (FXR) are up 37% and 32%, respectively.

PowerShares Dynamic Industrials Portfolio

ETF Trends editorial team contributed to this post.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.