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5 Sector ETFs That Showed Strength Despite the Worst October
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Wall Street registered its first back-to-back monthly loss of this year, with Dow Jones closing out the worst month since March. In October, Dow Jones tumbled 6% while the S&P 500 Index declined 3.5%. Though the stock market had a solid start last month on prospects of another round of fiscal stimulus from Congress and expectations of Democratic candidate Joe Biden election win, the rally faded as we headed into the month.
In fact, most of the decline came last week on the back of soaring COVID-19 cases in the United States and Europe as well as renewed lockdown measures that spurred fears of a prolonged economic slowdown. Additionally, concerns about stalled efforts toward further fiscal stimulus measures in Washington and pre-election jitters led to the chaos in the market. Per CBS News, investors lost nearly $1.7 trillion last week as the stock markets tumbled (read: Trade Stock Market Volatility With These ETFs).
Added to the decline in the stock market was the slide in big technology stocks following their quarterly results.
Amid the uncertainties, a few sectors have been surviving the market turmoil. We have highlighted five that have risen in the past month and could be compelling picks if the same trends prevail.
AdvisorShares Pure US Cannabis ETF (MSOS - Free Report) – Up 14.6%
Cannabis stocks have gained from Democratic vice president nominee Kamala Harris’ promise that a potential Biden administration would decriminalize marijuana. Additionally, Vermont has become the 11th state to legalize recreational marijuana. While many cannabis ETFs moved higher, MSOS has been the biggest winner. This is a new entrant in the marijuana space, having accumulated $32.7 million in just two months. It is the first and only actively managed ETF with dedicated cannabis exposure focusing exclusively on U.S. companies, including multi-state operators. It holds 28 securities in its basket and charges 74 bps in annual fees. The fund trades in an average daily volume of 69,000 shares.
The banking corner of the broader financial sector gained owing to the steepening of the yield curve. Notably, the yield curve steepened to the widest since June. Bargain hunting also added to some gains. KRE, with AUM of $1.1 billion and an average trading volume of around 9.1 million shares, offers exposure to regional banks. It follows the S&P Regional Banks Select Industry Index, charging investors 35 bps a year in fees. KRE holds 126 securities in its basket and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: 5 Top-Performing ETFs of Last Week).
Global X Lithium & Battery Tech ETF (LIT - Free Report) – Up 7.6%
Rise in demand for electric vehicles, in which lithium is used for batteries that power the cars, helped this ETF to move higher. This product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production by tracking the Solactive Global Lithium Index. It holds 42 securities in its basket, charging investors’ 75 bps in annual fees. The fund has amassed $864.5 million in AUM and trades in average daily volume of 403,000 shares.
ALPS Medical Breakthroughs ETF (SBIO - Free Report) – Up 7.6%
The biotech sector has been performing well driven by the progress in the development of a coronavirus vaccine or treatment, and waves of mergers and acquisitions. This fund provides exposure to companies with one or more drugs in phase II or phase III FDA clinical trials by tracking S-Network Medical Breakthroughs Index. It holds 91 securities in its basket. The product charges 50 basis points in fees per year from its investors and trades in a moderate average daily volume of about 40,000 shares. It has AUM of $210.5 million in its asset base and carries a Zacks ETF Rank #3 with a High risk outlook (read: Biotech ETFs to Shine on Coronavirus Antibodies Progress).
Rare earth metals got a boost from President Donald Trump’s recently signed executive order declaring national emergency in the mining industry in a move to shore up domestic supplies of rare earths minerals. REMX offers exposure to companies engaged in producing, refining and recycling of rare earth and strategic metals and minerals. It follows the MVIS Global Rare Earth/Strategic Metals Index, holding 21 stocks in its basket. The ETF has AUM of $157.7 million and an average daily volume of 203,000 shares. From a country look, Chinese firms dominate the portfolio with 43.1% share, closely followed by Australia (27.2%) and Canada (10.5%). The product charges 60 bps in annual fees.
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5 Sector ETFs That Showed Strength Despite the Worst October
Wall Street registered its first back-to-back monthly loss of this year, with Dow Jones closing out the worst month since March. In October, Dow Jones tumbled 6% while the S&P 500 Index declined 3.5%. Though the stock market had a solid start last month on prospects of another round of fiscal stimulus from Congress and expectations of Democratic candidate Joe Biden election win, the rally faded as we headed into the month.
In fact, most of the decline came last week on the back of soaring COVID-19 cases in the United States and Europe as well as renewed lockdown measures that spurred fears of a prolonged economic slowdown. Additionally, concerns about stalled efforts toward further fiscal stimulus measures in Washington and pre-election jitters led to the chaos in the market. Per CBS News, investors lost nearly $1.7 trillion last week as the stock markets tumbled (read: Trade Stock Market Volatility With These ETFs).
Added to the decline in the stock market was the slide in big technology stocks following their quarterly results.
Amid the uncertainties, a few sectors have been surviving the market turmoil. We have highlighted five that have risen in the past month and could be compelling picks if the same trends prevail.
AdvisorShares Pure US Cannabis ETF (MSOS - Free Report) – Up 14.6%
Cannabis stocks have gained from Democratic vice president nominee Kamala Harris’ promise that a potential Biden administration would decriminalize marijuana. Additionally, Vermont has become the 11th state to legalize recreational marijuana. While many cannabis ETFs moved higher, MSOS has been the biggest winner. This is a new entrant in the marijuana space, having accumulated $32.7 million in just two months. It is the first and only actively managed ETF with dedicated cannabis exposure focusing exclusively on U.S. companies, including multi-state operators. It holds 28 securities in its basket and charges 74 bps in annual fees. The fund trades in an average daily volume of 69,000 shares.
SPDR S&P Regional Banking ETF (KRE - Free Report) – Up 11.4%
The banking corner of the broader financial sector gained owing to the steepening of the yield curve. Notably, the yield curve steepened to the widest since June. Bargain hunting also added to some gains. KRE, with AUM of $1.1 billion and an average trading volume of around 9.1 million shares, offers exposure to regional banks. It follows the S&P Regional Banks Select Industry Index, charging investors 35 bps a year in fees. KRE holds 126 securities in its basket and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: 5 Top-Performing ETFs of Last Week).
Global X Lithium & Battery Tech ETF (LIT - Free Report) – Up 7.6%
Rise in demand for electric vehicles, in which lithium is used for batteries that power the cars, helped this ETF to move higher. This product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production by tracking the Solactive Global Lithium Index. It holds 42 securities in its basket, charging investors’ 75 bps in annual fees. The fund has amassed $864.5 million in AUM and trades in average daily volume of 403,000 shares.
ALPS Medical Breakthroughs ETF (SBIO - Free Report) – Up 7.6%
The biotech sector has been performing well driven by the progress in the development of a coronavirus vaccine or treatment, and waves of mergers and acquisitions. This fund provides exposure to companies with one or more drugs in phase II or phase III FDA clinical trials by tracking S-Network Medical Breakthroughs Index. It holds 91 securities in its basket. The product charges 50 basis points in fees per year from its investors and trades in a moderate average daily volume of about 40,000 shares. It has AUM of $210.5 million in its asset base and carries a Zacks ETF Rank #3 with a High risk outlook (read: Biotech ETFs to Shine on Coronavirus Antibodies Progress).
VanEck Vectors Rare Earth/Strategic Metals ETF (REMX - Free Report) – Up 7.4%
Rare earth metals got a boost from President Donald Trump’s recently signed executive order declaring national emergency in the mining industry in a move to shore up domestic supplies of rare earths minerals. REMX offers exposure to companies engaged in producing, refining and recycling of rare earth and strategic metals and minerals. It follows the MVIS Global Rare Earth/Strategic Metals Index, holding 21 stocks in its basket. The ETF has AUM of $157.7 million and an average daily volume of 203,000 shares. From a country look, Chinese firms dominate the portfolio with 43.1% share, closely followed by Australia (27.2%) and Canada (10.5%). The product charges 60 bps in annual fees.
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 >>