Despite broad retail investor disdain for the market, U.S. stocks had another solid start to the year. In fact, the S&P 500 is up over 7% YTD through the first six month months of 2014, putting the benchmark on pace for another double digit return year.
Yet while this broad market gain is definitely solid, it was easily trounced by a few sectors which more than doubled this seven percent performance in the first six months of the year. several segments actually put up gains that exceeded triple the S&P 500’s return in the time frame, showing that even though it may have been rocky, gains were definitely there for the taking in certain segments (also see 5 ETFs Up At Least 10% in the First Half of 2014).
Below, we discuss a few sector ETFs that have put up gains of at least 20% so far in 2014. All of these segments also focus exclusively on American equities, so they should definitely be worth a closer look by those seeking a more home-grown tilt to their portfolios following the Fourth of July Holiday:
Thanks to low interest rates, investors continued to pile into real estate across the country. And though home price gains have slowed lately, interest in this space is still quite high especially for yield focused investors.
One pick that has done exceptionally well in this market is the iShares Residential Real Estate Capped ETF (REZ - ETF report). This ETF has added close to 21% YTD, while it pays a 30-Day SEC yield of about 3.5%, making it a decent income choice as well (also see 4 ETFs Riding High in Q2).
Top holdings in this fund include Public Storage, Equity Residential, and Health Care REIT, though it is worth noting only 36 companies comprise the entire basket of the ETF. Still, this concentrated approach hasn’t stopped REZ from putting up very solid gains, though investors should note that the product currently has a Zacks ETF Rank #4 (Sell) so some longer term pain might be ahead.
Biotechnology was a very hot sector to start the year, though worries over high growth stocks really derailed the story in this space. However, a surge in M&A activity rekindled interest here and made many of the top funds in this segment all-star performers once more.
In particular, the First Trust Amex Biotechnology Index Fund (FBT - ETF report) and the SPDR S&P Biotech ETF (XBI - ETF report) managed to edge out the competition. Both of these funds put up gains of at least 21% YTD, nearly tripling SPY for the time frame (read The Guide to Surging Biotech ETFs).
Both of these products were helped by their focus on small and micro cap securities, as opposed to others in the segment. The surge in M&A deals and rumors really helped these pint-sized companies, making FBT and XBI prime beneficiaries.
Although the tech sector saw some rockiness, the semiconductor space was a surprise winner to start the year. Strength in many of the big names in this space was a prime reason for the outperformance, while strong Zacks Industry Ranks for many segments here didn’t hurt matters either.
Several funds really stood out here, including PSI, SOXX, and (XSD - ETF report). All three saw gains of at least 21% to start the year, though XSD did managed to edge out its competitors this round with a nearly 24% performance (see all the Technology ETFs here).
XSD’s outperformance can at least partially be attributed to its focus on small and mid caps with its equal weight methodology. This tilt towards higher beta names came in handy in the past few months, and with a strong industry rank in this corner of the market, more fireworks could come to this space to close out the year as well.
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