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6 Secret Santa ETFs to Add Cheer to Your Portfolio
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Wall Street has been sizzling hot post election. The COVID-19 vaccine development and hopes of their availability have pushed the stocks to new highs. This is especially true, as a vaccine will end the pandemic, leading to a faster-than-expected economic recovery.
The uptrend has also been powered by super-easy monetary and fiscal policies adopted by the central bank and government. Fed Chairman Jerome Powell has pledged to keep rates at lower levels until the end of 2023. A lower interest rate has provided consumers extra spending power, which in turn will push up economic activities. Notably, U.S. consumers grew more confident about the economy in early December on prospects of a vaccine. A gauge of U.S. consumer sentiment, as measured by the University of Michigan, climbed to the second-highest level since March to 81.4 from 76.9 in the prior month.
Holiday fervor is also adding to the strength even though consumers have flocked to e-commerce this year. Moreover, a Santa rally is coming up and would provide a further boost to the stocks. A Santa rally refers to the increase in stock prices in the final week of the calendar year (i.e. between Christmas and New Year’s Day) that extends into the first two days of the New Year.
Against such a backdrop, while most of the ETFs have been surging over the past month, there are some hidden gems or Secret Santa as we call them that could surprise investors with big returns this Christmas based on the current trends. We have highlighted some of these in detail below:
Here, we have chosen six ETFs that been lagging the gain of 2.5% for the broad market fund (SPY - Free Report) over the past month and have a Zacks ETF Rank # 2 (Buy) or 3 (Hold), suggesting room for upside in the final weeks of 2020.
This fund provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $2 billion, it holds a basket of 46 stocks and charges 42 bps in annual fees. The fund trades in heavy volume of around 3.4 million shares a day on average. It carries a Zack ETF Rank #3 and has shed 0.9% in a month (read: Mortgage Rates Hit Record Low: ETF Winner & Loser).
iShares Dow Jones Transportation Average Fund (IYT - Free Report)
The ETF follows the Dow Jones Transportation Average Index and offers exposure to the broad transportation sector. The fund holds a small basket of 20 stocks with railroads, air freight & logistics, trucking and airlines taking the top four spots. It has accumulated $1.4 billion in its asset base and charges 42 bps in annual fees. The fund has gained 0.6% in a month and carries a Zacks ETF Rank #3.
This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It has amassed $201.1 million in its asset base and charges 35 bps in annual fees. RTH has added 0.6% in a month and carries a Zacks ETF Rank #3.
The most-popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $24.7 billion in its asset base and trades in heavy volume of around 8.9 million shares. In total, the fund holds 63 securities in its basket with key holdings in pharma, healthcare equipment and supplies, healthcare providers and services, and biotech. It charges 13 bps in annual fees and has a Zacks ETF Rank #2. The product has added 0.8% in a month (read: A Look Back At the S&P 500 Sector ETFs in 2020).
This is the most-popular ETF in the industrial space with AUM of $15.8 billion and an average daily volume of around 11.3 million shares. The fund follows the Industrial Select Sector Index, holding 73 stocks in its basket. It is well spread out across sectors with aerospace & defense, machinery, industrial conglomerates, and road & rail that make up for a double-digit share each. This ETF charges 13 bps in fees per year and has a Zacks ETF Rank #2. It has gained 1.4% in a month.
The most-popular material ETF follows the Materials Select Sector Index. This fund manages about $5 billion in its asset base and trades in volumes as heavy as around 5.7 million. The ETF charges 13 bps in fees per year from investors and holds about 28 securities in its basket. In terms of industrial exposure, chemicals dominates the portfolio with 69% share, while containers & packaging, and metals & mining round off the top three positions. The fund is up 1.6% and has a Zacks ETF Rank #2 (read: Here's Why Material ETFs are Worth Your Attention Now).
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6 Secret Santa ETFs to Add Cheer to Your Portfolio
Wall Street has been sizzling hot post election. The COVID-19 vaccine development and hopes of their availability have pushed the stocks to new highs. This is especially true, as a vaccine will end the pandemic, leading to a faster-than-expected economic recovery.
America has started immunizing people by giving Pfizer (PFE - Free Report) shots, developed in collaboration with the German biotechnology company BioNTech (BNTX - Free Report) . This represents a historic development to counter the worst pandemic in over 100 years (read: Sector ETFs to Gain the Most on COVID-19 Vaccine Rollout).
The uptrend has also been powered by super-easy monetary and fiscal policies adopted by the central bank and government. Fed Chairman Jerome Powell has pledged to keep rates at lower levels until the end of 2023. A lower interest rate has provided consumers extra spending power, which in turn will push up economic activities. Notably, U.S. consumers grew more confident about the economy in early December on prospects of a vaccine. A gauge of U.S. consumer sentiment, as measured by the University of Michigan, climbed to the second-highest level since March to 81.4 from 76.9 in the prior month.
Holiday fervor is also adding to the strength even though consumers have flocked to e-commerce this year. Moreover, a Santa rally is coming up and would provide a further boost to the stocks. A Santa rally refers to the increase in stock prices in the final week of the calendar year (i.e. between Christmas and New Year’s Day) that extends into the first two days of the New Year.
Against such a backdrop, while most of the ETFs have been surging over the past month, there are some hidden gems or Secret Santa as we call them that could surprise investors with big returns this Christmas based on the current trends. We have highlighted some of these in detail below:
Here, we have chosen six ETFs that been lagging the gain of 2.5% for the broad market fund (SPY - Free Report) over the past month and have a Zacks ETF Rank # 2 (Buy) or 3 (Hold), suggesting room for upside in the final weeks of 2020.
iShares U.S. Home Construction ETF (ITB - Free Report)
This fund provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $2 billion, it holds a basket of 46 stocks and charges 42 bps in annual fees. The fund trades in heavy volume of around 3.4 million shares a day on average. It carries a Zack ETF Rank #3 and has shed 0.9% in a month (read: Mortgage Rates Hit Record Low: ETF Winner & Loser).
iShares Dow Jones Transportation Average Fund (IYT - Free Report)
The ETF follows the Dow Jones Transportation Average Index and offers exposure to the broad transportation sector. The fund holds a small basket of 20 stocks with railroads, air freight & logistics, trucking and airlines taking the top four spots. It has accumulated $1.4 billion in its asset base and charges 42 bps in annual fees. The fund has gained 0.6% in a month and carries a Zacks ETF Rank #3.
VanEck Vectors Retail ETF (RTH - Free Report)
This fund provides exposure to the 25 largest retail firms by tracking the MVIS US Listed Retail 25 Index. It has amassed $201.1 million in its asset base and charges 35 bps in annual fees. RTH has added 0.6% in a month and carries a Zacks ETF Rank #3.
Health Care Select Sector SPDR Fund (XLV - Free Report)
The most-popular healthcare ETF, XLV follows the Health Care Select Sector Index. This fund manages nearly $24.7 billion in its asset base and trades in heavy volume of around 8.9 million shares. In total, the fund holds 63 securities in its basket with key holdings in pharma, healthcare equipment and supplies, healthcare providers and services, and biotech. It charges 13 bps in annual fees and has a Zacks ETF Rank #2. The product has added 0.8% in a month (read: A Look Back At the S&P 500 Sector ETFs in 2020).
Industrial Select Sector SPDR (XLI - Free Report)
This is the most-popular ETF in the industrial space with AUM of $15.8 billion and an average daily volume of around 11.3 million shares. The fund follows the Industrial Select Sector Index, holding 73 stocks in its basket. It is well spread out across sectors with aerospace & defense, machinery, industrial conglomerates, and road & rail that make up for a double-digit share each. This ETF charges 13 bps in fees per year and has a Zacks ETF Rank #2. It has gained 1.4% in a month.
Materials Select Sector SPDR (XLB - Free Report)
The most-popular material ETF follows the Materials Select Sector Index. This fund manages about $5 billion in its asset base and trades in volumes as heavy as around 5.7 million. The ETF charges 13 bps in fees per year from investors and holds about 28 securities in its basket. In terms of industrial exposure, chemicals dominates the portfolio with 69% share, while containers & packaging, and metals & mining round off the top three positions. The fund is up 1.6% and has a Zacks ETF Rank #2 (read: Here's Why Material ETFs are Worth Your Attention Now).
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 >>