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The ongoing technology rout triggered by the surging yields has sparked overvaluation concerns in the high growth and high beta sector. The 10-year yields spiked to 1.47% on Mar 3, down from 1.61% reached last week, but were up nearly 50 basis points (bps) from a month ago level.
While investors are selling higher-valued technology stocks, they are flocking to the sectors that are poised to benefit from an improving economy. With the continued progress in more COVID-19 vaccines, rapid vaccination rollout and fresh round of U.S. stimulus, the economy is on the mend and on a speedy recovery path. The combination of factors will lead to higher demand for all types of products and services in the economy (read: Great Rotation From Bonds to Stocks: ETFs to Win).
In particular, Americans will spend on big-ticket items such as vacations and weddings, companies will go on hiring sprees, and the transition to new technologies such as electric vehicles will accelerate. Improvement in corporate earnings growth also bodes well for the stocks.
Further, the latest bouts of data indicate that the economy is growing faster than expected. U.S. consumer spending rose the most in seven months in January while construction spending surged to a record high, boosted by strong private and public outlays. U.S. manufacturing activity increased to a three-year high in February amid acceleration in new orders (read: U.S. Manufacturing at 3-Year High: ETFs in Focus).
That said, we have presented six ETFs from different corners of the market that scaled new highs in the latest trading session braving the tech rout are among the biggest winners so far this year.
Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report) – All-Time High Price: $51.10
This fund offers exposure to companies that are principally engaged in the design, production or distribution of goods or services in the leisure and entertainment industries by tracking the Dynamic Leisure and Entertainment Intellidex Index. It holds a small basket of 31 stocks with AUM of $1.7 billion and average trading volume of 500,000 shares per day. PEJ charges 63 bps in annual fees and has a Zacks ETF Rank #3 (Hold). It has surged 25% this year.
This ETF debuted in early last June and has attracted $465.8 million in AUM. It is designed to offer retail and institutional investors global exposure to sports betting and iGaming industries by tracking the Roundhill Sports Betting & iGaming Index. Sportsbook comprises 33.3% share while iGaming and technology round off the next two spots with double-digit exposure each. The fund holds 40 stocks in its basket and charges 75 bps in annual fees. It trades in an average daily volume of 465,000 shares and has gained 22.6% so far this year.
First Trust Financials AlphaDEX Fund (FXO - Free Report) - All-Time High Price: $41.35
This fund targets the broad financials sector and follows the StrataQuant Financials Index, which is designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices using the AlphaDEX screening methodology. Holding 105 stocks in its basket, the ETF has amassed $847.5 million and charges 62 bps in annual fees. It trades in average daily volume of 225,000 shares and has risen 18.4% so far this year. FXO has a Zacks ETF Rank #2 (Buy).
This fund offers broad exposure to the transportation sector with largest allocation to trucking, airlines, and air freight and logistics. It follows the S&P Transportation Select Industry Index, holding 42 stocks in its basket. With AUM of $575.1 million, the fund charges 35 bps in fees per year from investors and trades in a moderate volume of around 94,000 shares a day. It has a Zacks ETF Rank #2 and is up 17.8% so far this year (read: Airlines Drag Down Transportation Q4 Earnings: ETFs in Focus).
Invesco S&P 500 Equal Weight Communication Services ETF – All-Time High Price: $37.36
This fund targets the communication services sector and tracks the S&P 500 Equal Weight Communication Services Plus Index. It holds 27 stocks in its basket and charges 40 bps in annual fees. The product has amassed $34.5 million in its asset base and trades in lower average daily volume of 10,000 shares. It is up 16.5% so far this year and has a Zacks ETF Rank #3.
This product follows the S&P SmallCap 600 Capped Industrials Index, which measures the performance of companies engaged in the business of providing industrial products and services, including engineering, heavy machinery, construction, electrical equipment, aerospace and defense, and general manufacturing. The product has a basket of 97 securities with an expense ratio of 0.29%. It has AUM of $73.8 million while trading in a lower volume of 6,000 shares. It has gained 16.1% so far this year and has a Zacks ETF Rank #3 (read: 5 ETFs to Ride On the Rotation to Cyclical Sectors).
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6 Sector ETFs at All-Time Highs Braving Tech Rout
The ongoing technology rout triggered by the surging yields has sparked overvaluation concerns in the high growth and high beta sector. The 10-year yields spiked to 1.47% on Mar 3, down from 1.61% reached last week, but were up nearly 50 basis points (bps) from a month ago level.
While investors are selling higher-valued technology stocks, they are flocking to the sectors that are poised to benefit from an improving economy. With the continued progress in more COVID-19 vaccines, rapid vaccination rollout and fresh round of U.S. stimulus, the economy is on the mend and on a speedy recovery path. The combination of factors will lead to higher demand for all types of products and services in the economy (read: Great Rotation From Bonds to Stocks: ETFs to Win).
In particular, Americans will spend on big-ticket items such as vacations and weddings, companies will go on hiring sprees, and the transition to new technologies such as electric vehicles will accelerate. Improvement in corporate earnings growth also bodes well for the stocks.
Further, the latest bouts of data indicate that the economy is growing faster than expected. U.S. consumer spending rose the most in seven months in January while construction spending surged to a record high, boosted by strong private and public outlays. U.S. manufacturing activity increased to a three-year high in February amid acceleration in new orders (read: U.S. Manufacturing at 3-Year High: ETFs in Focus).
That said, we have presented six ETFs from different corners of the market that scaled new highs in the latest trading session braving the tech rout are among the biggest winners so far this year.
Invesco Dynamic Leisure and Entertainment ETF (PEJ - Free Report) – All-Time High Price: $51.10
This fund offers exposure to companies that are principally engaged in the design, production or distribution of goods or services in the leisure and entertainment industries by tracking the Dynamic Leisure and Entertainment Intellidex Index. It holds a small basket of 31 stocks with AUM of $1.7 billion and average trading volume of 500,000 shares per day. PEJ charges 63 bps in annual fees and has a Zacks ETF Rank #3 (Hold). It has surged 25% this year.
Roundhill Sports Betting & iGaming ETF (BETZ - Free Report) – All-Time High Price: $32.59
This ETF debuted in early last June and has attracted $465.8 million in AUM. It is designed to offer retail and institutional investors global exposure to sports betting and iGaming industries by tracking the Roundhill Sports Betting & iGaming Index. Sportsbook comprises 33.3% share while iGaming and technology round off the next two spots with double-digit exposure each. The fund holds 40 stocks in its basket and charges 75 bps in annual fees. It trades in an average daily volume of 465,000 shares and has gained 22.6% so far this year.
First Trust Financials AlphaDEX Fund (FXO - Free Report) - All-Time High Price: $41.35
This fund targets the broad financials sector and follows the StrataQuant Financials Index, which is designed by the AMEX to objectively identify and select stocks from the Russell 1000 Index that may generate positive alpha relative to traditional passive style indices using the AlphaDEX screening methodology. Holding 105 stocks in its basket, the ETF has amassed $847.5 million and charges 62 bps in annual fees. It trades in average daily volume of 225,000 shares and has risen 18.4% so far this year. FXO has a Zacks ETF Rank #2 (Buy).
SPDR S&P Transportation ETF (XTN - Free Report) – All-Time High Price: $85.14
This fund offers broad exposure to the transportation sector with largest allocation to trucking, airlines, and air freight and logistics. It follows the S&P Transportation Select Industry Index, holding 42 stocks in its basket. With AUM of $575.1 million, the fund charges 35 bps in fees per year from investors and trades in a moderate volume of around 94,000 shares a day. It has a Zacks ETF Rank #2 and is up 17.8% so far this year (read: Airlines Drag Down Transportation Q4 Earnings: ETFs in Focus).
Invesco S&P 500 Equal Weight Communication Services ETF – All-Time High Price: $37.36
This fund targets the communication services sector and tracks the S&P 500 Equal Weight Communication Services Plus Index. It holds 27 stocks in its basket and charges 40 bps in annual fees. The product has amassed $34.5 million in its asset base and trades in lower average daily volume of 10,000 shares. It is up 16.5% so far this year and has a Zacks ETF Rank #3.
Invesco S&P SmallCap Industrials ETF (PSCI - Free Report) – All-Time High Price: $93.29
This product follows the S&P SmallCap 600 Capped Industrials Index, which measures the performance of companies engaged in the business of providing industrial products and services, including engineering, heavy machinery, construction, electrical equipment, aerospace and defense, and general manufacturing. The product has a basket of 97 securities with an expense ratio of 0.29%. It has AUM of $73.8 million while trading in a lower volume of 6,000 shares. It has gained 16.1% so far this year and has a Zacks ETF Rank #3 (read: 5 ETFs to Ride On the Rotation to Cyclical Sectors).
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 >>