We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Bet on Quality ETFs as Vaccine Hope & Coronavirus Cases Rise
Read MoreHide Full Article
Wall Street has been showing immense strength on a vaccine development, which is being viewed as “a beginning to the end” of the coronavirus pandemic, and the prospect of divided congress, which is considered favorable for the economy.
Moderna (MRNA - Free Report) and Pfizer (PFE - Free Report) reported encouraging data from the late-stage trial of their COVID-19 vaccine. Moderna’s vaccine candidate was 94.5% effective against coronavirus while Pfizer’s potential vaccine was more than 90% effective. Meanwhile, Democratic candidate Joe Biden is likely to gain the control of the White House having become the presumptive president-elect of the United States while Republicans may keep the Senate. The combination will lead to favorable economic policies with reduced chances of major tax increases and tighter regulations (read: Biggest ETF Winners from Coronavirus Vaccine News).
Notably, the Dow Jones hit an all-time high on Nov 16 since February, marking its fastest bear market recovery in 30 years. This is especially true as the benchmark took 1,483 trading days to carve out a new all-time high after hitting a bear market, per Dow Jones Market Data. The Dow Jones is up about 60% since its Mar 23 bear market.
However, surging COVID-19 cases lately and the growing threat of a fresh round of economic lockdown have been weighing on investors’ confidence. According to Reuters, New Jersey, California and Iowa imposed fresh restrictions as the pandemic reached its most perilous point in the United States, threatening to worsen as the colder weather sets in.
Against such a backdrop, investors should focus on high-quality investing.
Why Quality Investing?
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility, elevated margins, and a track record of stable or rising sales and earnings growth. These products thus reduce volatility when compared to plain vanilla funds and hold up rather well during market swings. Further, academic research shows that high-quality companies consistently deliver superior risk-adjusted returns than the broader market over the long term (read: ETF Strategies to Play as Coronavirus Outbreak Aggravates).
Given this, we have highlighted five ETFs targeting this niche strategy. These could enjoy smooth trading and generate market-beating returns in the current market environment.
This fund provides exposure to large and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index.
This fund tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks that have the highest-quality score based on three fundamental measures — return on equity, accruals ratio and financial leverage ratio.
FlexShares Quality Dividend Index Fund (QDF - Free Report)
This ETF follows the Northern Trust Quality Dividend Index, which provides exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is similar to that of the Northern Trust 1250 Index (read: 5 Dividend ETFs to Ride Out Market Volatility).
This fund offers exposure to stocks that blend low volatility, quality and value exposure in a single strategy. This is done by tracking the MSCI USA Factor Mix A-Series Index.
Expense Ratio: 0.15% AUM: $829.7 million Average Daily Volume: 66,000 shares
This ETF offers equity exposure with a portfolio comprising the highest-quality U.S. stocks (defined by profitability, financial risk and earnings quality that aim to outperform over time) in each sector.
Expense Ratio: 0.12% AUM: $423.9 million Average Daily Volume: 90,000 shares
Bottom Line
Quality ETFs often provide a hedge against market volatility. Adding any of the above-mentioned products to one’s long-term portfolio could be a good move given their credit worthiness and soundness.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Bet on Quality ETFs as Vaccine Hope & Coronavirus Cases Rise
Wall Street has been showing immense strength on a vaccine development, which is being viewed as “a beginning to the end” of the coronavirus pandemic, and the prospect of divided congress, which is considered favorable for the economy.
Moderna (MRNA - Free Report) and Pfizer (PFE - Free Report) reported encouraging data from the late-stage trial of their COVID-19 vaccine. Moderna’s vaccine candidate was 94.5% effective against coronavirus while Pfizer’s potential vaccine was more than 90% effective. Meanwhile, Democratic candidate Joe Biden is likely to gain the control of the White House having become the presumptive president-elect of the United States while Republicans may keep the Senate. The combination will lead to favorable economic policies with reduced chances of major tax increases and tighter regulations (read: Biggest ETF Winners from Coronavirus Vaccine News).
Notably, the Dow Jones hit an all-time high on Nov 16 since February, marking its fastest bear market recovery in 30 years. This is especially true as the benchmark took 1,483 trading days to carve out a new all-time high after hitting a bear market, per Dow Jones Market Data. The Dow Jones is up about 60% since its Mar 23 bear market.
However, surging COVID-19 cases lately and the growing threat of a fresh round of economic lockdown have been weighing on investors’ confidence. According to Reuters, New Jersey, California and Iowa imposed fresh restrictions as the pandemic reached its most perilous point in the United States, threatening to worsen as the colder weather sets in.
Against such a backdrop, investors should focus on high-quality investing.
Why Quality Investing?
Quality stocks are rich in value characteristics with a healthy balance sheet, high return on capital, low volatility, elevated margins, and a track record of stable or rising sales and earnings growth. These products thus reduce volatility when compared to plain vanilla funds and hold up rather well during market swings. Further, academic research shows that high-quality companies consistently deliver superior risk-adjusted returns than the broader market over the long term (read: ETF Strategies to Play as Coronavirus Outbreak Aggravates).
Given this, we have highlighted five ETFs targeting this niche strategy. These could enjoy smooth trading and generate market-beating returns in the current market environment.
iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Report)
This fund provides exposure to large and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index.
Expense Ratio: 0.15%
AUM: $21.4 billion
Average Daily Volume: 843,000 shares
Invesco S&P 500 Quality ETF (SPHQ - Free Report)
This fund tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks that have the highest-quality score based on three fundamental measures — return on equity, accruals ratio and financial leverage ratio.
Expense Ratio: 0.15%
AUM: $2.4 billion
Average Daily Volume: 485,000 shares
FlexShares Quality Dividend Index Fund (QDF - Free Report)
This ETF follows the Northern Trust Quality Dividend Index, which provides exposure to a high-quality income-oriented portfolio of long-only U.S. equity securities, with an emphasis on long-term capital growth and a targeted overall beta that is similar to that of the Northern Trust 1250 Index (read: 5 Dividend ETFs to Ride Out Market Volatility).
Expense Ratio: 0.37%
AUM: $1.4 billion
Average Daily Volume: 47,000 shares
SPDR MSCI USA StrategicFactors ETF (QUS - Free Report)
This fund offers exposure to stocks that blend low volatility, quality and value exposure in a single strategy. This is done by tracking the MSCI USA Factor Mix A-Series Index.
Expense Ratio: 0.15%
AUM: $829.7 million
Average Daily Volume: 66,000 shares
JPMorgan U.S. Quality Factor ETF (JQUA - Free Report)
This ETF offers equity exposure with a portfolio comprising the highest-quality U.S. stocks (defined by profitability, financial risk and earnings quality that aim to outperform over time) in each sector.
Expense Ratio: 0.12%
AUM: $423.9 million
Average Daily Volume: 90,000 shares
Bottom Line
Quality ETFs often provide a hedge against market volatility. Adding any of the above-mentioned products to one’s long-term portfolio could be a good move given their credit worthiness and soundness.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>