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5 Market-Beating Sector ETFs of March

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Amid the volatility, the Wall Street ended March on a high note with Dow Jones and the S&P 500 logging in their best month since November, gaining 6.6% and 4.3%, respectively.

The rally were driven by the combination of factors including continued progress in more vaccines, rapid vaccination rollout and rounds of more stimulus that has led to faster-than-expected economic recovery. Additionally, reopening of the economy and improving corporate earnings added to the strength. All these have resulted in increased industrial activity and pickup in consumer demand, thereby driving the market sentiments higher.

However, surging yields continued to weigh on the stocks as it sparked overvaluation concerns and triggered a sell-off in the technology sector. As such, the tech-heavy Nasdaq Composite Index was the relative underperformer, gaining just 0.4% last month.

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

iShares U.S. Home Construction ETF (ITB - Free Report) – Up 13.9%

The housing market is showing strong resiliency amid surging raw material prices like lumber and wood, increasing construction costs and rising mortgage rates. This is because demand for homes remains robust with tightening supplies. ITB provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $2.6 billion, it holds a basket of 46 stocks with a heavy concentration on the top two firms. The product charges 42 basis points (bps) in annual fees and trades in heavy volume of around 3 million shares a day on average. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Can Housing ETFs Remain Red-Hot in 2021?)

John Hancock Multifactor Utilities ETF (JHMU - Free Report) – Up 10.5%

The utility sector has gained from bouts of volatility last month. Being the low-beta sector, utility is relatively protected from large swings (ups and downs) in the stock market and is thus considered a defensive investment or safe haven in turbulent times.

This fund focuses on the time-tested multifactor approach that emphasizes factors (smaller cap, lower relative price and higher profitability) that academic research has linked to higher expected return in the utilities sector. It follows the John Hancock Dimensional Utilities Index, holding 37 stocks with none accounting for more than 6.13% share. The fund has amassed $16.7 million in AUM while charging 40 bps in fees per year. It trades in average daily volume of 4,000 shares and has a Zacks ETF Rank #3.

First Trust Nasdaq Food & Beverage ETF (FTXG - Free Report) – Up 10.3%

With more American being vaccinated, consumer spending has risen, providing huge boost to FTXG. This ETF offers exposure to U.S. companies within the food and beverage industry. It tracks the Nasdaq US Smart Food & Beverage Index, holding 31 securities in its basket with each accounting for less than 10% share. It has AUM of just $3.9 million and charges 60 bps in annual fees. It sees a meager average daily volume of under 5,000 shares and has a Zacks ETF Rank #4 (Sell).

SPDR S&P Retail ETF (XRT - Free Report) – Up 9.5%

Americans are growing optimistic about an economic recovery, leading to spike in retail sales. This is especially true as the University of Michigan’s final sentiment index climbed to a pandemic high of 84.9 in late March from a preliminary reading of 83. The Conference Board on consumer confidence index also jumped to 109.7 in March — the highest level since the onset of the pandemic in March 2020 (read: 5 ETFs to Ride on Rising Consumer Confidence).

With AUM of $574 million, this product targets the broad retail sector by tracking the S&P Retail Select Industry Index. It holds 102 securities in its basket with key holdings in Internet & direct marketing retail, automotive retail, apparel retail and specialty stores. The fund charges 35 bps in annual fees and trades in heavy volume of 5 million shares per day on average. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.

Wedbush ETFMG Video Game Tech ETF (GAMR - Free Report) – Up 8.2%

The digital shift and change in consumer habits continued to drive this ETF higher. GAMR 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 106 stocks in its basket and has amassed $114.4 million in its asset base. The product charges 75 bps in annual fees and trades in volume of about 56,000 shares a day on average (read: 5 Tech ETFs Surviving Sell-Off Induced by Rising Yields).

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