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February is not known for good stock returns. A consensus carried out from 1950 to 2020 shows that February ended up offering positive stock returns in 40 years and negative returns in 31 years, per moneychimp.com, with an average negative return of 0.12%.
This year, global economies and corporates will leave no stone unturned to register a fast rebound from the COVID-19 slump. Vaccine news is coming in bulk with Novavax (NVAX - Free Report) being the latest to announce efficacy in its UK clinical trial. Before this, Pfizer, Moderna and Astrazeneca have come up with such success (read: Novavax (NVAX - Free Report) ETFs to Rise on Impressive Coronavirus Vaccine Update).
All these should keep the equity rally in the fine fettle while overvaluation concerns are nagging tensions. Against this backdrop, we highlight a few ETF options that can come across as intriguing bets for the month.
The underlying FTSE High Dividend Yield Index which is consists of common stocks of companies that pay out dividends that generally are higher than average. Dividend stocks often beat their non-dividend paying counterparts amid market uncertainty. Stocks with high dividend point to quality investing — a pre-requisite to making money in a volatile environment.
Even if there is capital loss, dividend payments make up for it to a large extent. Moreover, at the record-low yield environment, Zacks Rank #2 VYM offers a juicy 3.19% yield annually (read: Guide to High Dividend Paying ETFs).
Commodities - Invesco DB Commodity Index Tracking Fund (DBC)
The underlying DBIQ Optimum Yield Diversified Commodity Index Excess Return Index is a rules-based index composed of futures contracts on 14 of the most heavily-traded and important physical commodities in the world.
Commodities are likely to rebound from a 10-year bear market. The recovery in commodity prices, Goldman Sachs analysts say, “will actually be the beginning of a much longer structural bull market” that could mimic the boom in 1970s, when gold jumped 25 times, as well as the mid-to-late-2000s, when oil topped $140-a-barrel. Easy money policy, subdued strength of the greenback and fast revival from the pandemic-led slowdown should boost commodities now.
Communication – Communication Services Select Sector SPDR ETF (XLC)
The Zacks Rank #2 fund provides an effective representation of the communication services sector of the S&P 500 Index. The COVID-19 outbreak brightened the appeal for the work-and-learn-from-home culture. With exponential growth in video and other bandwidth-intensive applications owing to the mass adoption of smartphones and increased deployment of 5G technology, the communication industry is to set to rule irrespective of the pandemic. The fund is heavy on the likes of Facebook, Alphabet, T-Mobile, Comcast and Verizon.
Total Market – iShares Core S&P Total U.S. Stock Market ETF (ITOT)
Massive Fed and government stimulus are positive for the equity segment. Reopening of economies and the relative previous underperformance compared to the large caps, should add more strength to small caps ahead. However, having exposure to large-caps ensures diversification and stability. Hence, the total market ETF could turn out to be a wise bet.
Cyber Security – First Trust NASDAQ Cybersecurity ETF (CIBR)
The Nasdaq CTA Cybersecurity Index tracks the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors (read: Cybersecurity Stocks & ETFs Soar after Massive Hack).
Data breaches are rife amid the emerging work-from-home trend. Years’ worth of digital transformation has taken place in the peak of pandemic. Digital uses of the financial transaction are on the rise. All these, in turn, increased the risk of security breaches and threats.
International – First Trust Dorsey Wright International Focus 5 ETF (IFV - Free Report)
The underlying Dorsey Wright International Focus Five Index is designed to provide targeted exposure to the five First Trust international ETFs that offer the greatest potential to outperform the other ETFs in the selection universe.
Some international stocks and ETFs have appeared pretty sturdy lately. In fact, the S&P 500 is up only 0.8% this year compared with 1.7% gains in IFV. The fund’s U.S. version First Trust Dorsey Wright Focus 5 ETF (FV - Free Report) has also added about 0.7% this year.
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6 ETFs You May Love to Buy for February
February is not known for good stock returns. A consensus carried out from 1950 to 2020 shows that February ended up offering positive stock returns in 40 years and negative returns in 31 years, per moneychimp.com, with an average negative return of 0.12%.
This year, global economies and corporates will leave no stone unturned to register a fast rebound from the COVID-19 slump. Vaccine news is coming in bulk with Novavax (NVAX - Free Report) being the latest to announce efficacy in its UK clinical trial. Before this, Pfizer, Moderna and Astrazeneca have come up with such success (read: Novavax (NVAX - Free Report) ETFs to Rise on Impressive Coronavirus Vaccine Update).
All these should keep the equity rally in the fine fettle while overvaluation concerns are nagging tensions. Against this backdrop, we highlight a few ETF options that can come across as intriguing bets for the month.
Dividend – Vanguard High Dividend Yield ETF (VYM - Free Report)
The underlying FTSE High Dividend Yield Index which is consists of common stocks of companies that pay out dividends that generally are higher than average. Dividend stocks often beat their non-dividend paying counterparts amid market uncertainty. Stocks with high dividend point to quality investing — a pre-requisite to making money in a volatile environment.
Even if there is capital loss, dividend payments make up for it to a large extent. Moreover, at the record-low yield environment, Zacks Rank #2 VYM offers a juicy 3.19% yield annually (read: Guide to High Dividend Paying ETFs).
Commodities - Invesco DB Commodity Index Tracking Fund (DBC)
The underlying DBIQ Optimum Yield Diversified Commodity Index Excess Return Index is a rules-based index composed of futures contracts on 14 of the most heavily-traded and important physical commodities in the world.
Commodities are likely to rebound from a 10-year bear market. The recovery in commodity prices, Goldman Sachs analysts say, “will actually be the beginning of a much longer structural bull market” that could mimic the boom in 1970s, when gold jumped 25 times, as well as the mid-to-late-2000s, when oil topped $140-a-barrel. Easy money policy, subdued strength of the greenback and fast revival from the pandemic-led slowdown should boost commodities now.
Communication – Communication Services Select Sector SPDR ETF (XLC)
The Zacks Rank #2 fund provides an effective representation of the communication services sector of the S&P 500 Index. The COVID-19 outbreak brightened the appeal for the work-and-learn-from-home culture. With exponential growth in video and other bandwidth-intensive applications owing to the mass adoption of smartphones and increased deployment of 5G technology, the communication industry is to set to rule irrespective of the pandemic. The fund is heavy on the likes of Facebook, Alphabet, T-Mobile, Comcast and Verizon.
Total Market – iShares Core S&P Total U.S. Stock Market ETF (ITOT)
Massive Fed and government stimulus are positive for the equity segment. Reopening of economies and the relative previous underperformance compared to the large caps, should add more strength to small caps ahead. However, having exposure to large-caps ensures diversification and stability. Hence, the total market ETF could turn out to be a wise bet.
Cyber Security – First Trust NASDAQ Cybersecurity ETF (CIBR)
The Nasdaq CTA Cybersecurity Index tracks the performance of companies engaged in the cybersecurity segment of the technology and industrials sectors (read: Cybersecurity Stocks & ETFs Soar after Massive Hack).
Data breaches are rife amid the emerging work-from-home trend. Years’ worth of digital transformation has taken place in the peak of pandemic. Digital uses of the financial transaction are on the rise. All these, in turn, increased the risk of security breaches and threats.
International – First Trust Dorsey Wright International Focus 5 ETF (IFV - Free Report)
The underlying Dorsey Wright International Focus Five Index is designed to provide targeted exposure to the five First Trust international ETFs that offer the greatest potential to outperform the other ETFs in the selection universe.
Some international stocks and ETFs have appeared pretty sturdy lately. In fact, the S&P 500 is up only 0.8% this year compared with 1.7% gains in IFV. The fund’s U.S. version First Trust Dorsey Wright Focus 5 ETF (FV - Free Report) has also added about 0.7% this year.
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>>