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Top-Ranked ETFs, Stocks From Top Sector of the Last Decade

Sweta Killa

Amid a plethora of challenges, Wall Street was on a spectacular run over the last decade, rising from the depths of the financial crisis and Great Recession.

In fact, the S&P 500 gained nearly 190% in 10 years overplaying worries about debt crisis, government shutdown, the Middle East conflict, geopolitical tension, Greece turmoil, China’s soft landing issues, Japan’s recession, global slowdown, Brexit, the oil price carnage, and trade tariff war between the United States and China (read: 10 Top-Performing ETFs of the Past Decade).

The years 2013 and 2019 were the strongest of the decade. The U.S. stocks logged in the biggest percentage gain since 1997 in 2013 on the back of an improving economy and unprecedented stimulus from the Federal Reserve. In 2019, though trade uncertainty, recession jitters and geopolitical tension persisted, a dovish Fed, positive developments on the U.S.-China trade deal, and an improving economy led to the stock market rally.

The bullish trend is likely to continue in 2020 given the Fed’s accommodative interest rate policy, a resilient domestic economy and chances of the phase one deal signing this month, which eased global slowdown concerns. The U.S. economy is on a strong growth path with job additions at the fastest pace and unemployment dropping to the lowest level since 1969. The housing market is also clearly showing signs of a strong recovery with lower mortgage rates and slower home price growth acting as catalysts.

While the rally has been broad based, technology, consumer discretionary, healthcare and industrials led the way, gaining nearly 328%, 301%, 245% and 193%, respectively.

As such, investors should bet on the top performing sectors of a decade if the bullish trends continue. We have highlighted one ETF & stock each from these sectors that could be compelling picks for 2020 given their Zacks Rank #1 (Strong Buy) or #2 (Buy).   

Technology

Vanguard Information Technology ETF VGT: This fund manages about $25.5 billion in its asset base and provides exposure to 327 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index and is concentrated on the top two firms. The ETF has 0.10% in expense ratio, while volume is solid at nearly 472,000 shares. It has a Zacks ETF Rank #1 with a Medium risk outlook (read: Top ETF Stories of 2019 & Picks for 2020).

NVIDIA Corporation NVDA: This company offers graphics chip processors and related software to a wide range of visual computing platforms. The stock saw solid earnings estimate revision of 15 cents in three months for the fiscal year (ending Jan 2021) and has an estimated earnings growth rate of 30.3%. It has a Zacks Rank #2 and a Growth Score of B. You can see the complete list of today’s Zacks #1 Rank stocks here.

Consumer Discretionary

Consumer Discretionary Select Sector SPDR Fund XLY: This product offers exposure to the broad consumer discretionary space by tracking the Consumer Discretionary Select Sector Index. It is the largest and most-popular product in this space with AUM of nearly $14.4 billion and average daily volume of around 3.3 million shares. Holding 64 securities in its basket, the fund is concentrated on the top firm - Amazon AMZN – at 23.6% of assets while the rest accounts for less than 10% share. Internet & direct marketing retail dominates 29% of the portfolio while specialty retail, and hotels restaurants and leisure occupy the next two spots with a double-digit allocation each. The fund charges 0.13% in expense ratio and has a Zacks ETF Rank #2 with a Medium risk outlook (read: ETFs to Tap on Amazon's Record Holiday Sales).

lululemon athletica inc. LULU: This company is a yoga-inspired athletic apparel company that creates lifestyle components. It saw positive earnings estimate revision of 7 cents over the past three months for the fiscal year (ending Jan 21) and has an estimated earnings growth rate of 16.8%. It has a Zacks Rank #2 and a VGM Score of C.

Healthcare

SPDR S&P Biotech ETF XBI: With AUM of $4.3 billion, XBI provides equal-weight exposure of around 2% across 126 biotechnology stocks by tracking the S&P Biotechnology Select Industry Index. It has 0.35% in expense ratio and trades in average daily volume of 4.5 million shares. The fund has a Zacks ETF Rank #2 with a High risk outlook (read: Biotech Leading in Q4: Best ETFs & Stocks).

DexCom Inc. DXCM: This is a medical device company focused on the design, development and commercialization of continuous glucose monitoring systems. It saw solid earnings estimate revision of 37 cents over the past three months for 2020 and has an estimated earnings growth rate of 21.5%. DexCom has a Zacks Rank #2 and a Growth Score of A.

Industrials

Invesco DWA Industrials Momentum ETF PRN: This fund provides exposure to 40 companies by tracking the Dorsey Wright Industrials Technical Leaders Index. It is well balanced across each security with none accounting for more than 4% share in the basket. In terms of industrial exposure, aerospace and defense, machinery, IT services, and commercial services & supplies make up the top four. The fund has amassed $119.7 million in its asset base and charges 60 basis points in annual fees. It trades in average daily volume of 8,000 shares and has a Zacks ETF Rank #2 with a Medium risk outlook (read: 10 Top-Ranked ETFs Beating S&P 500 This Year).

Cintas Corporation CTAS: This company provides specialized services to businesses of all types throughout North America. It saw solid earnings estimate revision of 19 cents over the past three months for fiscal year (ending May 2020) and has an estimated earnings growth rate of 15.7%. The stock has a Zacks Rank #2 and a Growth Score of B.

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