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Top-Ranked Growth ETFs at New Highs to Tap for 2018
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The broad U.S. stock market has been scaling new highs with the S&P 500 and the Dow Jones registering their best year since 2013. Notably, the Dow logged its 70th record close of the year, the highest-ever number of record closes in a calendar year, while the Nasdaq broke the 7,000 level.
Optimism over tax reform and higher chances of the plan being signed into the law this Christmas has acted as the latest catalyst to the second-largest bull market. A massive $1.4-trillion tax cut will create an economic surge, boosting job growth and reflation trade. It will further accelerate earnings, leading to increased dividend and buyback activities. Additionally, the tax repatriation will allow companies to bring the offshore cash back home, paving the way for increased mergers and acquisitions (read: ETFs to Bet on the Final Tax Bill: What Hot, What's Not).
Strong corporate earnings and accelerating economic growth have been driving the stocks this year, suggesting another leg of the bull run heading into the New Year. This is especially true as earnings for the S&P 500 are expected to be up 11.7% in 2018, with the growth pace expected to double due to the tax legislation. Meanwhile, the economy expanded at the fastest clip in three years in best back-to-back quarters with at least 3% GDP growth and unemployment at the lowest level of 4.1% since December 2000. Further, Americans are highly optimistic about the economy with consumer confidence climbing to the highest level in 17 years.
Apart from these, a combination of other factors like a rise in oil price and higher interest rates are fueling growth. All these events have raised the appeal of riskier assets. While the rally has been broad-based, growth stocks are easily leading the way. Notably, the ultra-popular growth fund QQQ has risen 33.9% since the start of the year compared with gains of 11.5% for the value fund (IWD - Free Report) and 20% for the core fund SPY.
This is especially true as 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 players that are likely to witness higher revenues and earnings 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 (read: What Lies Ahead for Large-Cap Growth ETFs?).
However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility especially compared to value stocks.
Given this, we have highlighted five growth ETFs & stocks that hit their all-time highs in the last trading session. Any of these could be excellent plays for investors seeking to ride out the bullish trend in the New Year given that these have a Zacks Rank #1 (Strong Buy).
This ETF tracks the S&P 500 Pure Growth Index and holds 110 securities in its basket, with none accounting for more than 1.81% of total assets. Information technology is the top sector with 38.9% allocation, followed by double-digit exposure each in health care and consumer discretionary. The fund has amassed $3.2 billion in its asset base and has expense ratio of 0.35%. The ETF scaled a fresh high of $106.33, and has gained 27.7% in the year-to-date time frame.
This ETF provides exposure to the large-cap growth segment of the broad U.S. equity market by tracking the Russell 1000 Growth Index. With AUM of $40.5 billion, it holds 552 stocks in its basket, with each accounting for less than 7% share. Here too, information technology is the top sector, followed by consumer discretionary, health care and industrials. The fund charges 20 bps in annual fees and sees solid trading volume of around 1.4 million shares a day on average. The ETF hit a record high of $136.40, representing a gain of about 31.1% in the year-to-date time frame (read: 5 Tech ETFs That Crushed FANG ETFs in 2017).
With AUM of $8.4 billion, this ETF offers diversified exposure to the mid-cap segment by tracking the Russell MidCap Growth Index. It holds 422 securities in its basket with none accounting for more than 1.14% of total assets. It has key holdings in information technology, consumer discretionary, industrials and health care that account for double-digit exposure each. It charges 25 bps in annual fees and trades in average daily volume of 292,000 shares. The product has gained 25.1% in the year-to-date time frame, hitting a fresh high of $121.20.
This ETF follows the CRSP US Large Cap Growth Index, holding 313 stocks in its basket with none accounting for more than 7.2% share. Technology and consumer services are the top two sectors with 27.3% and 20.1% share, respectively. It has AUM of $32.3 billion and average daily volume of 604,000 shares. The fund charges 6 bps in fees per year. It touched an all-time high of $142.50, and has returned about 29% so far this year (see: all the Large Cap ETFs here).
This product follows the S&P 500 Growth Index, holding 290 stocks in its basket. It is pretty well spread across components with none holding more than 7.6% of assets. Like its cousins, SPYG is also heavy on information technology with 40.7% allocation, while healthcare, consumer discretionary and industrials round off the next three. The product has amassed $10.2 billion in its asset base and charges investors 4 bps in annual fees. Volume is good exchanging more than 153,000 shares a day on average. The ETF surged to a new high of $33.38, having gained 28% so far this year.
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Top-Ranked Growth ETFs at New Highs to Tap for 2018
The broad U.S. stock market has been scaling new highs with the S&P 500 and the Dow Jones registering their best year since 2013. Notably, the Dow logged its 70th record close of the year, the highest-ever number of record closes in a calendar year, while the Nasdaq broke the 7,000 level.
Optimism over tax reform and higher chances of the plan being signed into the law this Christmas has acted as the latest catalyst to the second-largest bull market. A massive $1.4-trillion tax cut will create an economic surge, boosting job growth and reflation trade. It will further accelerate earnings, leading to increased dividend and buyback activities. Additionally, the tax repatriation will allow companies to bring the offshore cash back home, paving the way for increased mergers and acquisitions (read: ETFs to Bet on the Final Tax Bill: What Hot, What's Not).
Strong corporate earnings and accelerating economic growth have been driving the stocks this year, suggesting another leg of the bull run heading into the New Year. This is especially true as earnings for the S&P 500 are expected to be up 11.7% in 2018, with the growth pace expected to double due to the tax legislation. Meanwhile, the economy expanded at the fastest clip in three years in best back-to-back quarters with at least 3% GDP growth and unemployment at the lowest level of 4.1% since December 2000. Further, Americans are highly optimistic about the economy with consumer confidence climbing to the highest level in 17 years.
Apart from these, a combination of other factors like a rise in oil price and higher interest rates are fueling growth. All these events have raised the appeal of riskier assets. While the rally has been broad-based, growth stocks are easily leading the way. Notably, the ultra-popular growth fund QQQ has risen 33.9% since the start of the year compared with gains of 11.5% for the value fund (IWD - Free Report) and 20% for the core fund SPY.
This is especially true as 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 players that are likely to witness higher revenues and earnings 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 (read: What Lies Ahead for Large-Cap Growth ETFs?).
However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility especially compared to value stocks.
Given this, we have highlighted five growth ETFs & stocks that hit their all-time highs in the last trading session. Any of these could be excellent plays for investors seeking to ride out the bullish trend in the New Year given that these have a Zacks Rank #1 (Strong Buy).
Guggenheim S&P 500 Pure Growth ETF (RPG - Free Report)
This ETF tracks the S&P 500 Pure Growth Index and holds 110 securities in its basket, with none accounting for more than 1.81% of total assets. Information technology is the top sector with 38.9% allocation, followed by double-digit exposure each in health care and consumer discretionary. The fund has amassed $3.2 billion in its asset base and has expense ratio of 0.35%. The ETF scaled a fresh high of $106.33, and has gained 27.7% in the year-to-date time frame.
iShares Russell 1000 Growth ETF (IWF - Free Report)
This ETF provides exposure to the large-cap growth segment of the broad U.S. equity market by tracking the Russell 1000 Growth Index. With AUM of $40.5 billion, it holds 552 stocks in its basket, with each accounting for less than 7% share. Here too, information technology is the top sector, followed by consumer discretionary, health care and industrials. The fund charges 20 bps in annual fees and sees solid trading volume of around 1.4 million shares a day on average. The ETF hit a record high of $136.40, representing a gain of about 31.1% in the year-to-date time frame (read: 5 Tech ETFs That Crushed FANG ETFs in 2017).
iShares Russell Mid-Cap Growth ETF (IWP - Free Report)
With AUM of $8.4 billion, this ETF offers diversified exposure to the mid-cap segment by tracking the Russell MidCap Growth Index. It holds 422 securities in its basket with none accounting for more than 1.14% of total assets. It has key holdings in information technology, consumer discretionary, industrials and health care that account for double-digit exposure each. It charges 25 bps in annual fees and trades in average daily volume of 292,000 shares. The product has gained 25.1% in the year-to-date time frame, hitting a fresh high of $121.20.
Vanguard Growth ETF (VUG - Free Report)
This ETF follows the CRSP US Large Cap Growth Index, holding 313 stocks in its basket with none accounting for more than 7.2% share. Technology and consumer services are the top two sectors with 27.3% and 20.1% share, respectively. It has AUM of $32.3 billion and average daily volume of 604,000 shares. The fund charges 6 bps in fees per year. It touched an all-time high of $142.50, and has returned about 29% so far this year (see: all the Large Cap ETFs here).
SPDR S&P 500 Growth ETF (SPYG - Free Report)
This product follows the S&P 500 Growth Index, holding 290 stocks in its basket. It is pretty well spread across components with none holding more than 7.6% of assets. Like its cousins, SPYG is also heavy on information technology with 40.7% allocation, while healthcare, consumer discretionary and industrials round off the next three. The product has amassed $10.2 billion in its asset base and charges investors 4 bps in annual fees. Volume is good exchanging more than 153,000 shares a day on average. The ETF surged to a new high of $33.38, having gained 28% so far this year.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>