Top Ranked ETFs That Crushed the Market YTD
In the face of higher rate fears for a longer period and soaring yields, Wall Street has shown strong resilience this year, underscoring economic optimism and steady inflows.
There have been winners from many corners of the investing world. We highlight five ETFs from different corners that have easily crushed the benchmark by wide margins so far this year and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). These are VanEck Vectors Semiconductor ETF SMH, Communication Services Select Sector SPDR Fund XLC, Invesco NASDAQ Internet ETF PNQI, iShares U.S. Home Construction ETF ITB and Consumer Discretionary Select Sector SPDR Fund XLY. These funds are likely to continue outperforming should the trends prevail.
The economy has withstood the worst of the Fed’s policy tightening. The central bank has raised interest rates 11 times to the highest level since 2001 over the course of 16 months and has hinted at one more rate hike this year if needed. The ongoing strength in the economy and the surging oil prices threaten to revive inflationary pressure. The Fed, in its latest meeting, kept interest rates steady at a 22-year high in the range of 5.25% to 5.5% but signaled one more hike this year.
Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have slowed in recent months but remain strong and the unemployment rate has remained low. The U.S. banking system is also deemed to be sound and resilient. Further, corporate earnings have improved. There has been a notable improvement in the earnings outlook in recent months, with positive revisions for several key sectors since the start of the third quarter.
Not to mention, the technology and energy sectors have been the biggest movers in the first nine months. Technology remained the most profitable sector this year despite the slump in the third quarter on bets over higher interest rates for a longer period. Meanwhile, energy made a solid comeback in recent months on the rise in oil prices driven by tightening supply conditions and the prospect of higher demand (read: 5 Best-Performing Sector ETFs of Nine Months).
The global oil market is expected to face the biggest deficit in over a decade and comes as the two major oil-producing nations, Saudi Arabia and Russia, extended their voluntary cuts by the end of the year. On the other hand, “world oil demand is scaling record highs,” said the International Energy Agency in a recent note. Strong summer air travel, increased oil use in power generation and surging Chinese petrochemical activity are driving demand higher.
We have profiled the above-mentioned ETFs in detail below:
VanEck Vectors Semiconductor ETF (SMH) – Up 44.1%
VanEck Vectors Semiconductor ETF offers exposure to the companies involved in semiconductor production and equipment. SMH follows the MVIS US Listed Semiconductor 25 Index, which measures the overall performance of companies involved in semiconductor production and equipment. VanEck Vectors Semiconductor ETF holds 26 stocks in its basket.
VanEck Vectors Semiconductor ETF has managed assets worth $9.4 billion and charges 35 bps in annual fees and expenses. SMH is heavily traded with a volume of 7.5 million shares per day and has a Zacks ETF Rank #2 with a High risk outlook (read: 5 Top Technology ETFs YTD With More Upside Potential).
Communication Services Select Sector SPDR Fund (XLC) – Up 38.6%
Communication Services Select Sector SPDR Fund offers exposure to companies from telecommunication services, media, entertainment and interactive media & services, and has accumulated $13.1 billion in its asset base. It follows the Communication Services Select Sector Index and holds 23 stocks in its basket. About 48% of the portfolio is allocated to interactive media & services, while entertainment and media round off the next two.
Communication Services Select Sector SPDR Fund charges 10 bps in annual fees and trades in an average daily volume of 5.4 million shares. It has a Zacks ETF Rank #2.
Invesco NASDAQ Internet ETF (PNQI) – Up 37.5%
Invesco NASDAQ Internet ETF follows the Nasdaq CTA Internet Index, which measures the performance of companies engaged in Internet-related businesses listed on the New York Stock Exchange, NYSE American, Cboe Exchange or The Nasdaq Stock Market. The product holds 84 stocks in its basket with a moderate concentration on the top five firms.
Invesco NASDAQ Internet ETF has amassed $553.1 million in its asset base and charges 60 bps in fees per year. The fund trades in a light volume of 48,000 shares.
iShares U.S. Home Construction ETF (ITB) – Up 28.9%
iShares U.S. Home Construction ETF provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index.
With AUM of $1.9 billion, iShares U.S. Home Construction ETF holds a basket of 46 stocks with a heavy concentration on the top two firms. The product charges 40 bps in annual fees and trades in a heavy volume of around 3 million shares a day on average. iShares U.S. Home Construction ETF has a Zacks ETF Rank #2 with a High risk outlook (read: Is It Time to Buy Homebuilding ETFs Following Warren Buffett?).
Consumer Discretionary Select Sector SPDR Fund (XLY) – Up 25.6%
Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in this space, with AUM of $17.4 billion and an average daily volume of around 4.3 million shares. It offers exposure to the broad consumer discretionary space and tracks the Consumer Discretionary Select Sector Index.
Consumer Discretionary Select Sector SPDR Fund holds 52 securities in its basket, with key holdings in broad-line retail, automobiles, hotels, restaurants and leisure, automobiles and specialty retail with a double-digit allocation each. It charges 0.10% in expense ratio and has a Zacks ETF Rank #1.
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iShares U.S. Home Construction ETF (ITB): ETF Research Reports
VanEck Semiconductor ETF (SMH): ETF Research Reports
Consumer Discretionary Select Sector SPDR ETF (XLY): ETF Research Reports
Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
Communication Services Select Sector SPDR ETF (XLC): ETF Research Reports
