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After witnessing the biggest sell-off of 2017 last week, the U.S. stock market bounced back and has been surging. In fact, the S&P 500 recouped all the losses and hit new highs in yesterday’s trading session following the Fed minutes. The minutes, which point at another rate hike in June, has bolstered confidence into the economy.
A pickup in economic activity, robust corporate earnings, Trump pro-growth policies, and improving global sentiments especially after the French election added to the strength. Further, a spike in oil price after Saudi Arabia and Russia agreed to extend their production cuts for nine more months until March 2018 has renewed optimism in the energy sector and weighing heavily on the equity market (read: Saudi, Russia Boost Oil Price: Bet on Leveraged ETFs).
While the rally has been broad-based, growth stocks are easily leading the way. This is especially true as the ultra-popular growth fund (QQQ - Free Report) climbed 2.7% over the past five days compared with gains of 1.7% for the value fund (IWD - Free Report) and 2% for the core fund (SPY - Free Report) .
Why Growth?
Growth investing is basically a momentum play and a great strategy in a trending market (a market characterized by a prolonged uptrend). Growth stocks refer to high-quality stocks that are likely to witness revenue and earnings increase at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. As such, growth funds tend to outperform during an uptrend.
Given this, it might be prudent to take a closer look at growth ETFs and stocks that led the market over the past five days and have the potential to continue doing so, especially if the current trend prevails from a few more weeks.
ETFs
Below we highlight five funds that have seen their rank surging to the top hierarchy Zacks Rank #1 (Strong Buy) from #3 (Hold) in the latest ratings update, and could thus outperform.
This ETF follows the CRSP US Large Cap Growth Index, holding 324 stocks in its basket with none holding more than 7.1% share. Technology and consumer services are the top two sectors with 25.6% and 21.6% share, respectively. It has AUM of $26.8 billion and average daily volume of 872,000 shares. The fund charges 6 bps in fees per year (read: 7 Large-Cap Growth ETFs That Are Sizzling).
This fund tracks the S&P 500 Growth Index and holds 323 stocks with each holding less than 7.1% share. From a sector look, the fund has top holdings in information technology at 35.7%, while consumer discretionary, healthcare and industrials round off the next three spots. It charges 18 bps in annual fees and has amassed $17.8 billion in its asset base. Volume is good exchanging about 776,000 shares in hand a day.
PowerShares Dynamic Large Cap Growth Portfolio (PWB - Free Report)
This ETF follows the Dynamic Large Cap Growth Intellidex Index with a well-diversified portfolio of 50 stocks as none accounts for more than 3.65% of assets. Information technology takes the top spot at 37.1%, followed by consumer discretionary (20.1%) and healthcare (14.2%). The product has accumulated $444.4 million in its asset base and charges 57 bps in fees per year. It trades in a lower average daily volume of 44,000 shares.
With AUM of $4.2 billion, SCHG follows the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. It holds 430 stocks in its basket with a large concentration on the top firm Apple (AAPL) at 7.4% while other firms hold less than 3.6% share. The product is also heavy on information technology at 28.6% while consumer discretionary, health care and industrials also get a double-digit exposure each in the portfolio. It charges 4 bps in annual fees and saw average volume of more than 312,000 shares a day (read: A Feast of ETFs with Apple on Plate).
This product tracks the S&P 900 Growth Index and is home to 565 stocks with a slight tilt toward Apple. Information technology is the top sector accounting for one-third of the portfolio while consumer discretionary, healthcare and industrials get double-digit exposure each. The fund has accumulated $2.3 billion in its asset base and trades in solid volume of 492,000 shares a day on average. Expense ratio comes in at 0.05%.
This New York-based company is the largest provider of weight control programs in the world. The stock is expected to see earnings growth of 31.96% and revenue growth of 8.77% in 2017 compared with the industry averages of 19.35% and 0%, respectively. It has a market cap of $1.72 billion.
This Hawaii-based company is the largest airline engaged primarily in the scheduled transportation of passengers, cargo and mail. For 2017, its earnings are expected to grow 0.03% versus the industry’s average decline of 9.12%. Revenue will likely grow 12.43% against the industry’s average of 5.58%. Hawaiian Holdings has a market cap of $2.64 billion (read: ETFs & Stocks to Gain Height on Busy Air Summer Travel).
This Beijing-based company operates as an online consumer finance marketplace that connects borrowers and investors primarily in the People’s Republic of China. While the company is expected to see whopping revenue growth of 53.99% in 2017 versus industry average of 6.03%, earnings growth of 12.22% should be below the industry average of 29.76%. Yirendai has a market cap of $1.44 billion.
This Guangzhou-based company is a communication social platform, which engages users in online group activities through voice, text and video. With a market cap of $3.16 billion, the company is expected to see earnings growth of 35.53% this year versus the industry average of 12.50% and revenue growth of 13.02% versus the industry average of 1.64%.
This New Jersey-based company is a growing specialty retailer of apparel and accessories for children from newborn to 12 years of age. Its earnings and revenues for 2017 are expected to grow 31.22% and 2.11%, respectively, against negative industry averages. Children's Place has a market cap of $1.94 billion.
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5 Top-Ranked Growth ETFs & Stocks to Buy Now
After witnessing the biggest sell-off of 2017 last week, the U.S. stock market bounced back and has been surging. In fact, the S&P 500 recouped all the losses and hit new highs in yesterday’s trading session following the Fed minutes. The minutes, which point at another rate hike in June, has bolstered confidence into the economy.
A pickup in economic activity, robust corporate earnings, Trump pro-growth policies, and improving global sentiments especially after the French election added to the strength. Further, a spike in oil price after Saudi Arabia and Russia agreed to extend their production cuts for nine more months until March 2018 has renewed optimism in the energy sector and weighing heavily on the equity market (read: Saudi, Russia Boost Oil Price: Bet on Leveraged ETFs).
While the rally has been broad-based, growth stocks are easily leading the way. This is especially true as the ultra-popular growth fund (QQQ - Free Report) climbed 2.7% over the past five days compared with gains of 1.7% for the value fund (IWD - Free Report) and 2% for the core fund (SPY - Free Report) .
Why Growth?
Growth investing is basically a momentum play and a great strategy in a trending market (a market characterized by a prolonged uptrend). Growth stocks refer to high-quality stocks that are likely to witness revenue and earnings increase at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices. As such, growth funds tend to outperform during an uptrend.
Given this, it might be prudent to take a closer look at growth ETFs and stocks that led the market over the past five days and have the potential to continue doing so, especially if the current trend prevails from a few more weeks.
ETFs
Below we highlight five funds that have seen their rank surging to the top hierarchy Zacks Rank #1 (Strong Buy) from #3 (Hold) in the latest ratings update, and could thus outperform.
Vanguard Growth ETF (VUG - Free Report)
This ETF follows the CRSP US Large Cap Growth Index, holding 324 stocks in its basket with none holding more than 7.1% share. Technology and consumer services are the top two sectors with 25.6% and 21.6% share, respectively. It has AUM of $26.8 billion and average daily volume of 872,000 shares. The fund charges 6 bps in fees per year (read: 7 Large-Cap Growth ETFs That Are Sizzling).
iShares S&P 500 Growth ETF IVW
This fund tracks the S&P 500 Growth Index and holds 323 stocks with each holding less than 7.1% share. From a sector look, the fund has top holdings in information technology at 35.7%, while consumer discretionary, healthcare and industrials round off the next three spots. It charges 18 bps in annual fees and has amassed $17.8 billion in its asset base. Volume is good exchanging about 776,000 shares in hand a day.
PowerShares Dynamic Large Cap Growth Portfolio (PWB - Free Report)
This ETF follows the Dynamic Large Cap Growth Intellidex Index with a well-diversified portfolio of 50 stocks as none accounts for more than 3.65% of assets. Information technology takes the top spot at 37.1%, followed by consumer discretionary (20.1%) and healthcare (14.2%). The product has accumulated $444.4 million in its asset base and charges 57 bps in fees per year. It trades in a lower average daily volume of 44,000 shares.
Schwab U.S. Large-Cap Growth ETF (SCHG - Free Report)
With AUM of $4.2 billion, SCHG follows the Dow Jones U.S. Large-Cap Growth Total Stock Market Index. It holds 430 stocks in its basket with a large concentration on the top firm Apple (AAPL) at 7.4% while other firms hold less than 3.6% share. The product is also heavy on information technology at 28.6% while consumer discretionary, health care and industrials also get a double-digit exposure each in the portfolio. It charges 4 bps in annual fees and saw average volume of more than 312,000 shares a day (read: A Feast of ETFs with Apple on Plate).
iShares Core S&P U.S. Growth ETF (IUSG - Free Report)
This product tracks the S&P 900 Growth Index and is home to 565 stocks with a slight tilt toward Apple. Information technology is the top sector accounting for one-third of the portfolio while consumer discretionary, healthcare and industrials get double-digit exposure each. The fund has accumulated $2.3 billion in its asset base and trades in solid volume of 492,000 shares a day on average. Expense ratio comes in at 0.05%.
Stocks
We highlight five stocks that have recently seen their rank surging to a Zacks Rank #1 with a Growth Style Score of A. You can see the complete list of today’s Zacks #1 Rank stocks with Growth Style Score of A here.
Weight Watchers International Inc (WTW - Free Report)
This New York-based company is the largest provider of weight control programs in the world. The stock is expected to see earnings growth of 31.96% and revenue growth of 8.77% in 2017 compared with the industry averages of 19.35% and 0%, respectively. It has a market cap of $1.72 billion.
Hawaiian Holdings Inc. (HA - Free Report)
This Hawaii-based company is the largest airline engaged primarily in the scheduled transportation of passengers, cargo and mail. For 2017, its earnings are expected to grow 0.03% versus the industry’s average decline of 9.12%. Revenue will likely grow 12.43% against the industry’s average of 5.58%. Hawaiian Holdings has a market cap of $2.64 billion (read: ETFs & Stocks to Gain Height on Busy Air Summer Travel).
Yirendai Ltd. (YRD - Free Report)
This Beijing-based company operates as an online consumer finance marketplace that connects borrowers and investors primarily in the People’s Republic of China. While the company is expected to see whopping revenue growth of 53.99% in 2017 versus industry average of 6.03%, earnings growth of 12.22% should be below the industry average of 29.76%. Yirendai has a market cap of $1.44 billion.
YY Inc. (YY - Free Report)
This Guangzhou-based company is a communication social platform, which engages users in online group activities through voice, text and video. With a market cap of $3.16 billion, the company is expected to see earnings growth of 35.53% this year versus the industry average of 12.50% and revenue growth of 13.02% versus the industry average of 1.64%.
The Children's Place Inc. (PLCE - Free Report)
This New Jersey-based company is a growing specialty retailer of apparel and accessories for children from newborn to 12 years of age. Its earnings and revenues for 2017 are expected to grow 31.22% and 2.11%, respectively, against negative industry averages. Children's Place has a market cap of $1.94 billion.
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 >>