After a bout of volatility last week, U.S. stock market staged a solid comeback to kickoff March. This is especially true as Treasury bond yields dropped following a sharp rise last week leading to a rebound in tech stocks, which were the biggest victim of surging yields.
Additionally, encouraging updates on vaccines development as well as fiscal stimulus bolstered bets over a swift economic recovery. Johnson & Johnson ( JNJ Quick Quote JNJ - Free Report) became the third authorized COVID-19 vaccine candidate in the United States over the weekend. The company shipped out 4 million single-dose vaccine on Mar 1, with 16 million more doses expected by the end of the month. It has agreed to provide the country with 100 million doses by the end of June. On the stimulus front, the U.S. House of Representatives passed a $1.9 trillion stimulus package, namely the American Rescue Plan Act of 2021, over the weekend. The package will now move to the Senate for further consideration. The twin news has buoyed the economic outlook, thereby bolstering investors’ risk appetite (read: ETF Strategies to Gain From the Stimulus & Vaccine Optimism). Further, the latest upbeat data infused confidence into the economy. U.S. manufacturing activity increased to a three-year high in February amid acceleration in new orders while U.S. construction spending surged to a record high in January, boosted by strong private and public outlays. Notably, the S&P 500 jumped more than 2% in its strongest one-day gain since June while the tech-heavy Nasdaq Composite Index and small-cap Russell 2000 outperformed, gaining more than 3% each. Meanwhile, the Dow logged in its best daily gain in nearly four months. Given the jump in investors’ sentiment, ETFs that still trade at bargain price seem excellent picks. Using our database, first we selected ETFs with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is because these ranks suggest strengthening fundamentals and superior weighting methodologies that could allow them to gain higher than their counterparts in a booming market. Then we narrowed down the list to funds having lower P/E ratio than the broad market fund ( SPY Quick Quote SPY - Free Report) , expense ratio of less than 0.50% and dividend yield of at least 2%. Notably, SPY is currently selling at P/E of 25.16 (as per etfdb.com). Here are the six ETFs that are currently undervalued and could generate solid returns in a bullish market. SPDR S&P Biotech ETF ( XBI Quick Quote XBI - Free Report) – P/E Ratio: 9.25 With AUM of $7.8 billion, XBI provides equal-weight exposure across 169 biotechnology stocks by tracking the S&P Biotechnology Select Industry Index. It has 0.35% in expense ratio and trades in average daily volume of 5.2 million shares. The fund has a Zacks ETF Rank #2 with a High risk outlook (read: How Will Biotech ETFs React to Q4 Earnings?). Global X SuperDividend ETF ( SDIV Quick Quote SDIV - Free Report) – P/E Ratio: 9.73 This ETF provides exposure to the 107 highest-dividend-paying equities around the world by tracking the Solactive Global SuperDividend Index. It has amassed $835.1 million in its asset base and sees good trading volume of about 472,000 shares a day on average. Its expense ratio is 0.59%. The fund has a Zacks ETF Rank #3 with a Low risk outlook (read: US Dividends Jump to Record High Amid Pandemic: ETFs to Tap). iShares U.S. Oil & Gas Exploration & Production ETF ( IEO Quick Quote IEO - Free Report) – P/E Ratio: 9.96 This product offers exposure to U.S. companies that are engaged in the exploration, production, and distribution of oil and gas. It follows the Dow Jones U.S. Select Oil Exploration & Production Index, holding 38 stocks in its basket. The ETF has AUM of $228.6 million and trades in volume of 147,000 shares a day, on average. It charges 42 bps in annual fees and expenses and has a Zacks ETF Rank #3 (read: 5 ETFs to Ride On the Rotation to Cyclical Sectors). First Trust Dow Jones Select MicroCap ETF ( FDM Quick Quote FDM - Free Report) – P/E Ratio: 11.12 This ETF tracks the Dow Jones Select Microcap Index, which represents microcap stocks that are comparatively liquid and have strong fundamentals. It holds 155 stocks in its basket with AUM of $144.9 million and trades in average daily volume of 17,000 shares. The fund charges 60 bps in annual fees and Zacks ETF Rank #3. iShares U.S. Insurance ETF ( IAK Quick Quote IAK - Free Report) - P/E Ratio: 11.14 This fund offers exposure to U.S. companies that provide life, property and casualty, and full line insurance by tracking the Dow Jones U.S. Select Insurance Index. It holds 63 securities in its basket with about half of the portfolio dominated by property & casualty insurance, while life & health insurance and multiline insurance round off the top three spots with a double-digit exposure each. IAK has amassed $68 million in its asset base while trading in average trading volume of 4,000 shares. It charges 42 bps in annual fees and has a Zacks ETF Rank #3. Roundhill Acquirers Deep Value ETF ( DEEP Quick Quote DEEP - Free Report) - P/E Ratio: 12.20 With AUM of $33.5 million, this ETF offers exposure to deeply undervalued stock by tracking the performance of the Acquirers Deep Value Index. It holds 100 stocks in its basket and charges 80 bps in fees from investors per year. The fund has a Zacks ETF Rank #3 (read: Value Outshines Growth: 5 ETF Winners). Want key ETF info delivered straight to your inbox?
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