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5 Quality ETFs for Outperformance This Holiday Season
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Higher inflation, Fed’s aggressive rate hikes and China’s zero-COVID policy continue to wreak havoc on the stock market and are feared to retain the momentum for the rest of this year. However, optimism around the holiday season is expected to fuel stocks (read: 5 ETFs That Deserve Special Thanks in Rotten 2022).
Investors should focus on high-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 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.
Given this, we highlighted five ETFs targeting this niche strategy. iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500 Quality ETF (SPHQ - Free Report) , ALPS Barron's 400 ETF (BFOR - Free Report) , FlexShares Quality Dividend Index Fund (QDF - Free Report) and SPDR MSCI USA StrategicFactors ETF (QUS - Free Report) could enjoy smooth-trading and generate market-beating returns in the current market environment.
The holiday season started with a huge bang despite concerns about inflation and higher prices. Consumers spent a record $9.12 billion, up 2.3% year over year, on online shopping during Black Friday this year, according to Adobe. Holiday spending is expected to be healthy despite inflationary challenges with retail sales likely to grow 6-8% from the 2021 level during November and December to $942.6-$960.4 billion, per the National Retail Federation. Holiday online sales are forecast to increase 10-12% to $262.8-$267.6 billion, up from $238.9 billion in 2021.
Further, the expectations of a less aggressive pace of U.S. monetary tightening as soon as the next month supported the stock market. The latest Fed minutes from the November meeting confirmed that the officials expect to switch to smaller interest rate increases soon (read: ETFs to Benefit From Dovish Fed Signals).
With an AUM of $18.5 billion, iShares Edge MSCI USA Quality Factor ETF 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. QUAL holds 124 stocks in its basket, with each making up not more than a 4.3% share.
iShares Edge MSCI USA Quality Factor ETF charges 15 bps of annual fees and trades an average daily volume of 1.4 million shares.
Invesco S&P 500 Quality ETF tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks with the highest-quality score based on three fundamental measures, such as return on equity, accruals ratio and the financial leverage ratio.
Holding 100 stocks in its basket, Invesco S&P 500 Quality ETF amassed $3.7 billion in its asset base and traded an average daily volume of 886,000 shares. SPHQ charges 15 bps in fees per year.
With an AUM of $137.9 million, ALPS Barron's 400 ETF follows the Barron's 400 Index, offering investors exposure to the high-performing securities of U.S. companies. It uses MarketGrader's fundamental analysis to select stocks based on the strength of their fundamentals in growth, value, profitability and cash flow and then screens such components for specific criteria regarding concentration, market capitalization and liquidity.
ALPS Barron's 400 ETF holds 400 stocks in its basket, with none making up for more than 0.4% of assets. BFOR charges 65 bps as annual fees and trades a volume of 5,000 shares per day on average.
FlexShares Quality Dividend Index Fund (QDF - Free Report)
FlexShares Quality Dividend Index Fund follows the Northern Trust Quality Dividend Index and maximizes exposure to quality and dividends, while maintaining a beta near 1. QDF is home to 131 stocks in its basket, with none making up for more than 8.1% of assets (read: 10 Most-Loved Dividend ETFs of 2022).
FlexShares Quality Dividend Index Fund accumulated $1.6 billion in its asset base and traded an average daily volume of 83,000 shares. QDF charges 37 bps as fees per year from investors.
SPDR MSCI USA StrategicFactors ETF offers exposure to stocks that combine low volatility, quality and value factor strategies. This is done by tracking the MSCI USA Factor Mix A-Series Capped Index. SPDR MSCI USA StrategicFactors ETF holds 622 stocks in its basket, with each accounting for less than 3% share.
SPDR MSCI USA StrategicFactors ETF attracted $909.6 million in its asset base and traded an average daily volume of 35,000 shares. QUS charges 15 bps of fees per year from investors.
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 healthy move, given their creditworthiness and soundness.
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5 Quality ETFs for Outperformance This Holiday Season
Higher inflation, Fed’s aggressive rate hikes and China’s zero-COVID policy continue to wreak havoc on the stock market and are feared to retain the momentum for the rest of this year. However, optimism around the holiday season is expected to fuel stocks (read: 5 ETFs That Deserve Special Thanks in Rotten 2022).
Investors should focus on high-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 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.
Given this, we highlighted five ETFs targeting this niche strategy. iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Report) , Invesco S&P 500 Quality ETF (SPHQ - Free Report) , ALPS Barron's 400 ETF (BFOR - Free Report) , FlexShares Quality Dividend Index Fund (QDF - Free Report) and SPDR MSCI USA StrategicFactors ETF (QUS - Free Report) could enjoy smooth-trading and generate market-beating returns in the current market environment.
The holiday season started with a huge bang despite concerns about inflation and higher prices. Consumers spent a record $9.12 billion, up 2.3% year over year, on online shopping during Black Friday this year, according to Adobe. Holiday spending is expected to be healthy despite inflationary challenges with retail sales likely to grow 6-8% from the 2021 level during November and December to $942.6-$960.4 billion, per the National Retail Federation. Holiday online sales are forecast to increase 10-12% to $262.8-$267.6 billion, up from $238.9 billion in 2021.
Further, the expectations of a less aggressive pace of U.S. monetary tightening as soon as the next month supported the stock market. The latest Fed minutes from the November meeting confirmed that the officials expect to switch to smaller interest rate increases soon (read: ETFs to Benefit From Dovish Fed Signals).
iShares Edge MSCI USA Quality Factor ETF (QUAL - Free Report)
With an AUM of $18.5 billion, iShares Edge MSCI USA Quality Factor ETF 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. QUAL holds 124 stocks in its basket, with each making up not more than a 4.3% share.
iShares Edge MSCI USA Quality Factor ETF charges 15 bps of annual fees and trades an average daily volume of 1.4 million shares.
Invesco S&P 500 Quality ETF (SPHQ - Free Report)
Invesco S&P 500 Quality ETF tracks the S&P 500 Quality Index, a benchmark of S&P 500 stocks with the highest-quality score based on three fundamental measures, such as return on equity, accruals ratio and the financial leverage ratio.
Holding 100 stocks in its basket, Invesco S&P 500 Quality ETF amassed $3.7 billion in its asset base and traded an average daily volume of 886,000 shares. SPHQ charges 15 bps in fees per year.
ALPS Barron's 400 ETF (BFOR - Free Report)
With an AUM of $137.9 million, ALPS Barron's 400 ETF follows the Barron's 400 Index, offering investors exposure to the high-performing securities of U.S. companies. It uses MarketGrader's fundamental analysis to select stocks based on the strength of their fundamentals in growth, value, profitability and cash flow and then screens such components for specific criteria regarding concentration, market capitalization and liquidity.
ALPS Barron's 400 ETF holds 400 stocks in its basket, with none making up for more than 0.4% of assets. BFOR charges 65 bps as annual fees and trades a volume of 5,000 shares per day on average.
FlexShares Quality Dividend Index Fund (QDF - Free Report)
FlexShares Quality Dividend Index Fund follows the Northern Trust Quality Dividend Index and maximizes exposure to quality and dividends, while maintaining a beta near 1. QDF is home to 131 stocks in its basket, with none making up for more than 8.1% of assets (read: 10 Most-Loved Dividend ETFs of 2022).
FlexShares Quality Dividend Index Fund accumulated $1.6 billion in its asset base and traded an average daily volume of 83,000 shares. QDF charges 37 bps as fees per year from investors.
SPDR MSCI USA StrategicFactors ETF (QUS - Free Report)
SPDR MSCI USA StrategicFactors ETF offers exposure to stocks that combine low volatility, quality and value factor strategies. This is done by tracking the MSCI USA Factor Mix A-Series Capped Index. SPDR MSCI USA StrategicFactors ETF holds 622 stocks in its basket, with each accounting for less than 3% share.
SPDR MSCI USA StrategicFactors ETF attracted $909.6 million in its asset base and traded an average daily volume of 35,000 shares. QUS charges 15 bps of fees per year from investors.
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 healthy move, given their creditworthiness and soundness.