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February was the most volatile month with wild swings in the stock market. This is especially true as surging bond yields continued to weigh on stocks sparking overvaluation concerns and triggering a tech sell-off. The 10-year Treasury yields spiked to one-year high of 1.6% last week after remaining below 1% for the most of 2020.
However, continued progress in more vaccines, rapid vaccination rollout and the prospect of further U.S. stimulus led to expectations for higher economic growth. The combination of factors will result in increased industrial activity and pickup in consumer demand, thereby maintaining the market sentiments. In particular, U.S. consumer spending rose the most in seven months in January, indicating that the economy is growing faster than expected. Improvement in corporate earnings growth also bodes well for stocks.
Investors should note that the flight to cyclical sectors benefited the major bourses last month despite the sell-off in high-growth and high-beta stocks. The Dow Jones has been the biggest beneficiary of this rotation, climbing 4% in February. Meanwhile, the S&P 500 logged in a monthly gain of about 3.5% and the tech-heavy Nasdaq Composite Index underperformed with just 1.8% gains (read: 5 ETFs to Ride On the Rotation to Cyclical Sectors).
Against such a backdrop, we have highlighted five sector ETFs that outperformed in February and are likely to continue doing so, should the same trends prevail.
Amplify Transformational Data Sharing ETF (BLOK - Free Report) – Up 31.8%
A crypto crazy run made the blockchain ETF the biggest winner last month. Bitcoin, the largest cryptocurrency, topped above $58,000 for the first time ever last month, before retreating last week. BLOK is actively managed, providing investors global exposure to a basket of the leading companies engaged in the development and utilization of blockchain technologies. It has AUM of $1.2 billion in its asset base and trades in an average daily volume of 952,000 shares. The product holds a basket of 54 stocks with American firms dominating about 56.8% of the portfolio, followed by Asia Pacific (36.8%). The ETF has an expense ratio of 0.71% (read: 5 Hot Tech ETFs to Tap on Beaten Down Prices).
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) – Up 31.2%
The energy sector gained as oil price rose about 20% last month buoyed by supply disruption brought in by the cold blast and expectation for higher demand on an improving economy. This product follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. Holdings 28 stocks in its basket, the fund has amassed $24 million in its asset base while trading in an average daily volume of 18,000 shares. It charges 63 bps in annual fees and expenses (read: Will the Energy ETFs See a Sustained Rally?).
North Shore Global Uranium Mining ETF (URNM - Free Report) – Up 30.5%
Uranium miners got a boost from improving supply/demand dynamics as well as push for more clean energy projects. Additionally, most of the stocks are undervalued, making them a bargain hunt for investors. This ETF provides exposure to companies that are involved in the mining, exploration, development, and production of uranium, as well as companies that hold physical uranium or other non-mining assets. It follows the North Shore Global Uranium Mining Index and charges investors 85 bps in annual fee. The ETF holds 27 stocks in its basket with double-digit exposure to the top two firms. It has accumulated $116.6 million in its asset base and trades in a lower volume of 68,000 shares per day on average.
Travel stocks rallied on rotation to cyclical stocks, which tend to perform well on an improving economy. This is the first ETF that offers direct access to the technology-focused global travel and tourism industry. It follows the Prime Travel Technology Index, charging investors 75 bps in annual fees. The fund holds 28 stocks in its basket, with travel booking and reservations making up for 48.6%, followed by travel price comparison (17.2%), and ride sharing and hailing (13.5%). AWAY has accumulated $227.3 million in its asset base and trades in an average daily volume of 187,000 shares.
Cannabis stocks ride high on hopes of wider legalization and near-term decriminalization as well as the growing adoption of marijuana in more states. Additionally, the deal activities as well as Reddit frenzy have strengthened the bullish case for these stocks. With AUM of $142.6 million, CNBS is actively managed and invests 80% of its assets in securities of companies with 50% or more of their revenues from the cannabis and hemp ecosystem. The fund holds 26 securities and charges 75 bps in annual fees. It trades in an average daily volume of 266,000 shares (read: Marijuana ETFs on a High on Reddit Frenzy).
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5 Best Sector ETFs of February
February was the most volatile month with wild swings in the stock market. This is especially true as surging bond yields continued to weigh on stocks sparking overvaluation concerns and triggering a tech sell-off. The 10-year Treasury yields spiked to one-year high of 1.6% last week after remaining below 1% for the most of 2020.
However, continued progress in more vaccines, rapid vaccination rollout and the prospect of further U.S. stimulus led to expectations for higher economic growth. The combination of factors will result in increased industrial activity and pickup in consumer demand, thereby maintaining the market sentiments. In particular, U.S. consumer spending rose the most in seven months in January, indicating that the economy is growing faster than expected. Improvement in corporate earnings growth also bodes well for stocks.
Investors should note that the flight to cyclical sectors benefited the major bourses last month despite the sell-off in high-growth and high-beta stocks. The Dow Jones has been the biggest beneficiary of this rotation, climbing 4% in February. Meanwhile, the S&P 500 logged in a monthly gain of about 3.5% and the tech-heavy Nasdaq Composite Index underperformed with just 1.8% gains (read: 5 ETFs to Ride On the Rotation to Cyclical Sectors).
Against such a backdrop, we have highlighted five sector ETFs that outperformed in February and are likely to continue doing so, should the same trends prevail.
Amplify Transformational Data Sharing ETF (BLOK - Free Report) – Up 31.8%
A crypto crazy run made the blockchain ETF the biggest winner last month. Bitcoin, the largest cryptocurrency, topped above $58,000 for the first time ever last month, before retreating last week. BLOK is actively managed, providing investors global exposure to a basket of the leading companies engaged in the development and utilization of blockchain technologies. It has AUM of $1.2 billion in its asset base and trades in an average daily volume of 952,000 shares. The product holds a basket of 54 stocks with American firms dominating about 56.8% of the portfolio, followed by Asia Pacific (36.8%). The ETF has an expense ratio of 0.71% (read: 5 Hot Tech ETFs to Tap on Beaten Down Prices).
Invesco Dynamic Energy Exploration & Production ETF (PXE - Free Report) – Up 31.2%
The energy sector gained as oil price rose about 20% last month buoyed by supply disruption brought in by the cold blast and expectation for higher demand on an improving economy. This product follows the Dynamic Energy Exploration & Production Intellidex Index, which thoroughly evaluates companies involved in the exploration and production of natural resources used to produce energy based on a variety of investment merit criteria, including price momentum, earnings momentum, quality, management action and value. Holdings 28 stocks in its basket, the fund has amassed $24 million in its asset base while trading in an average daily volume of 18,000 shares. It charges 63 bps in annual fees and expenses (read: Will the Energy ETFs See a Sustained Rally?).
North Shore Global Uranium Mining ETF (URNM - Free Report) – Up 30.5%
Uranium miners got a boost from improving supply/demand dynamics as well as push for more clean energy projects. Additionally, most of the stocks are undervalued, making them a bargain hunt for investors. This ETF provides exposure to companies that are involved in the mining, exploration, development, and production of uranium, as well as companies that hold physical uranium or other non-mining assets. It follows the North Shore Global Uranium Mining Index and charges investors 85 bps in annual fee. The ETF holds 27 stocks in its basket with double-digit exposure to the top two firms. It has accumulated $116.6 million in its asset base and trades in a lower volume of 68,000 shares per day on average.
ETFMG Travel Tech ETF (AWAY - Free Report) – Up 29.7%
Travel stocks rallied on rotation to cyclical stocks, which tend to perform well on an improving economy. This is the first ETF that offers direct access to the technology-focused global travel and tourism industry. It follows the Prime Travel Technology Index, charging investors 75 bps in annual fees. The fund holds 28 stocks in its basket, with travel booking and reservations making up for 48.6%, followed by travel price comparison (17.2%), and ride sharing and hailing (13.5%). AWAY has accumulated $227.3 million in its asset base and trades in an average daily volume of 187,000 shares.
Amplify Seymour Cannabis ETF (CNBS - Free Report) – Up 28.7%
Cannabis stocks ride high on hopes of wider legalization and near-term decriminalization as well as the growing adoption of marijuana in more states. Additionally, the deal activities as well as Reddit frenzy have strengthened the bullish case for these stocks. With AUM of $142.6 million, CNBS is actively managed and invests 80% of its assets in securities of companies with 50% or more of their revenues from the cannabis and hemp ecosystem. The fund holds 26 securities and charges 75 bps in annual fees. It trades in an average daily volume of 266,000 shares (read: Marijuana ETFs on a High on Reddit Frenzy).
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 >>