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5 Sector ETFs That Outperformed in a Volatile January

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The stock market has seen a shaky start to 2021 as the U.S. stock had the worst start in five years and then hit new highs on optimism over the COVID-19 vaccine rollout and more stimulus from Washington. The surge in coronavirus cases and a slew of weak economic data continued to take a toll on investors’ sentiment.

In particular, the major U.S. indices retreated in the final week of 2021 on the back of heightened volatility triggered by retail trading frenzy in some of the stocks like GameStop Corp. (GME - Free Report) and AMC Entertainment Holdings (AMC - Free Report) . As such, the three indices logged in their worst week since October, dropping more than 3% each, sending the Dow Jones and S&P 500 into the red for the first month of 2021.

Meanwhile, the tech-heavy Nasdaq Composite Index recorded a gain of 1.4% for the month buoyed by extended and stricter lockdowns that continued to drive demand for e-commerce in everything (read: Ride the Impressive Nasdaq Rally With These 5 ETFs).

Against such a backdrop, we have highlighted five sector ETFs that outperformed in January and are likely to continue doing so should the same trends prevail.

Global X Cannabis ETF (POTX - Free Report) – Up 46.5%

Pot stocks rallied on the Democratic victories in Georgia’s two runoff elections that spurred hopes for near-term decriminalization and the growing adoption of marijuana in more states. A slew of financing deals and strong earnings reports have more further fuel to the surging pot stocks.

POTX seeks to invest in companies across the cannabis industry and tracks the Cannabis Index. It holds 18 stocks in its basket, with Canadian firms accounting for 75.3% of assets while the United States and Britain take 12.2% and 7.7% share, respectively. The product has accumulated $88.2 million in its asset base and trades in an average daily volume of 266,000 shares. Expense ratio comes in at 0.50%.

SPDR S&P Retail ETF (XRT - Free Report) – Up 36.8%

The surge in this retail ETF was propelled by a dramatic jump in GameStop — the result of an extraordinary frenzy spurred by social media posts from prominent CEOs and Internet influencers as well as a hedge-fund-driven short squeeze. Notably, GameStop occupies the top position in XRT with 12.4% of assets (read: How to Trade GameStop Trading Frenzy With ETFs).

With AUM of $709.5 million, this product targets the broad retail sector by tracking the S&P Retail Select Industry Index. It holds 94 securities in its basket with key holdings in Internet & direct marketing retail, automotive retail, apparel retail, computer & electronics retail, and specialty stores. The fund charges 35 bps in annual fees and trades in an average daily volume of around 3.8 million shares. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Wedbush ETFMG Video Game Tech ETF (GAMR - Free Report) – Up 35.9%

This ETF also got a boost from the GameStop trading frenzy. It offers exposure to the companies involved in the video game technology industry — game developers, console and chip manufacturers, and game retailers — by tracking the EEFund Video Game Tech Index. It holds 92 stocks in its basket with GameStop occupying the top position at 26.3%. The fund has amassed $174.4 million in its asset base and charges 75 bps in annual fees. It trades in volume of about 32,000 shares a day on average (read: Video Gaming ETFs to Win as Sales Keep Rising Amid Pandemic).

ETFMG Treatments Testing and Advancements ETF (GERM - Free Report) – Up 26.6%

The optimism over vaccine rollout from more biotech companies has been providing an upside to GERM. This fund offers exposure to biotech companies directly engaged in the testing and treatments of infectious diseases by tracking the Prime Treatments, Testing and Advancements Index. It holds 68 stocks in its basket and charges 68 bps in annual fees. The ETF has amassed $56.5 million in its asset base and trades in an average daily volume of 44,000 shares.

3D Printing ETF (PRNT - Free Report) – Up 26.2%

PRNT has been on a tear buoyed by the acceleration in the fourth industrial revolution, which is a shift toward automated, hyper-connected, hyper-efficient and — in some cases — decentralized factories, enabled by breakthrough advancements in Big Data, the Internet of Things and cloud computing. This fund follows the Total 3D-Printing Index, which is designed to track the price movement of companies involved in the 3D printing industry. It has a basket of 49 securities and charges 66 bps in annual fees. The ETF has amassed $283.6 million in its asset base while trades in an average daily volume of 262,000 shares.

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