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The S&P 500 has been enjoying a huge rally this year, hitting a fresh high on several occasions. The benchmark logged its longest streak of quarterly gains since 2017 and ended the first half with the second-best performance since 1998. The S&P 500 is up 16% so far this year, shrugging off concerns over rising inflation, Biden’s tax hike plans and global chip crisis.
The rally has been powered by the speedy economic recovery, given widespread vaccinations, reopening of economies and expanded stimulus. The huge infrastructure package, signs of a healing labor market and strong corporate profit growth are also adding to the strength. The combination of factors has powered activities across all sectors and categories, resulting in increased consumer spending and confidence (read: Top Performing ETFs of the First Half).
In particular, the S&P 500 has been outperforming this year due to the strength in value and cyclical stocks, which were battered last year in the pandemic. The solid trend is likely to continue given the booming economy and resumption of businesses. Additionally, the minutes of the last Fed meeting, which indicates that officials may not be ready yet to tightening policy, will drive the stocks.
Against such a backdrop, the proxy version, SPDR S&P 500 ETF Trust (SPY - Free Report) , which tracks the S&P 500 Index has climbed 17% so far this year. Let’s take a closer look at the fundamentals of SPY and its best stocks:
Inside the SPY
The ETF holds 505 stocks in its basket with each accounting for no more than 6.2% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, consumer discretionary, communication services and financials accounting for a double-digit allocation each. It has AUM of $381.7 billion and charges 9 bps in fees per year. The product trades in heavy volume of around 59.1 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors (see: all the Large Cap Blend ETFs here).
SPY has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Though most stocks in the fund’s portfolio have been in the deeper green so far this year, we have highlighted 10 stocks that led the rally and have a Zacks Rank #1 (Strong Buy) or #2:
L Brands Inc. : It has evolved from an apparel-based specialty retailer to a segment leader focused on women’s intimate and other apparel, personal care, beauty and home fragrance products. It has soared 94.3% so far this year and has an estimated earnings growth rate of 67.3% for the fiscal year (ending January 2022). The stock has a Zacks Rank #2 and a VGM Score of B.
Marathon Oil Corporation (MRO - Free Report) : This is a leading oil and natural gas exploration and production company with operations in the United States and Africa. It has jumped about 93% and has estimated earnings growth of 164.7% for this year. The stock has a Zacks ETF Rank #2 and a VGM Score of A (read: Will 2021 be the Best Year for Energy ETFs in Three Decades?).
Generac Holdings Inc. (GNRC - Free Report) : It is a leading manufacturer of power generation equipment, energy storage systems and other power products including portable, residential, commercial and industrial generators. The stock has surged 90% and has an estimated earnings growth of 56.7% for this year. It has a Zacks Rank #2 and a Growth Score of A.
Diamondback Energy Inc. (FANG - Free Report) : It is an independent oil and gas exploration & production company, with its primary focus on the Permian Basin. The stock has climbed nearly 82% so far this year and has estimated earnings growth of 196.7% for this year. It has a Zacks Rank #1 and a VGM Score of B.
Nucor Corporation (NUE - Free Report) : This company is a leading producer of structural steel, steel bars, steel joists, steel deck and cold finished bars in the United States. It has jumped about 80% so far this year and has an estimated earnings growth rate of 386.2% for this year. Nucor Corporation has a Zacks Rank #1 and a VGM Score of B.
Ford Motor Company (F - Free Report) : This company designs, manufactures, markets and services cars, trucks, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles. It has risen about 62% and has an estimated earnings growth rate of 158.5% for this year. The stock has a Zacks ETF Rank #1 and a VGM Score of B (read: ETF & Stocks to Ride on Auto Industry Strength).
Hess Corporation (HES - Free Report) : This global integrated energy company is engaged in exploration, production, development, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas. It has gained about 58% so far this year and has an estimated earnings growth rate of 166.9% for this year. The stock has a Zacks Rank #1 and Growth Score of B.
Applied Materials Inc. (AMAT - Free Report) : It is one of the world’s largest suppliers of equipment for the fabrication of semiconductor, flat panel liquid crystal displays (LCDs), and solar photovoltaic (PV) cells and modules. The stock has climbed nearly 56% so far this year and has an estimated earnings growth rate of 57.1% for the fiscal year ending October 2021. It has a Zacks Rank #2 and a Momentum Score of B.
NVIDIA Corporation (NVDA - Free Report) : This company is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. The stock has gained 56% and has an estimated earnings growth rate of 59% for fiscal year (ending Jan 22). It has a Zacks Rank #2 and a Growth Score of A.
Charles River Laboratories International Inc. (CRL - Free Report) : This full service, early-stage contract research organization provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions globally accelerate their research and drug development efforts. The stock is up more than 53% so far this year and has an estimated earnings growth rate of 22.9% for this year. The stock has a Zacks Rank #2 and a Growth Score of B.
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10 Top-Ranked Stocks Powering S&P 500 ETF
The S&P 500 has been enjoying a huge rally this year, hitting a fresh high on several occasions. The benchmark logged its longest streak of quarterly gains since 2017 and ended the first half with the second-best performance since 1998. The S&P 500 is up 16% so far this year, shrugging off concerns over rising inflation, Biden’s tax hike plans and global chip crisis.
The rally has been powered by the speedy economic recovery, given widespread vaccinations, reopening of economies and expanded stimulus. The huge infrastructure package, signs of a healing labor market and strong corporate profit growth are also adding to the strength. The combination of factors has powered activities across all sectors and categories, resulting in increased consumer spending and confidence (read: Top Performing ETFs of the First Half).
In particular, the S&P 500 has been outperforming this year due to the strength in value and cyclical stocks, which were battered last year in the pandemic. The solid trend is likely to continue given the booming economy and resumption of businesses. Additionally, the minutes of the last Fed meeting, which indicates that officials may not be ready yet to tightening policy, will drive the stocks.
Against such a backdrop, the proxy version, SPDR S&P 500 ETF Trust (SPY - Free Report) , which tracks the S&P 500 Index has climbed 17% so far this year. Let’s take a closer look at the fundamentals of SPY and its best stocks:
Inside the SPY
The ETF holds 505 stocks in its basket with each accounting for no more than 6.2% of the assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, consumer discretionary, communication services and financials accounting for a double-digit allocation each. It has AUM of $381.7 billion and charges 9 bps in fees per year. The product trades in heavy volume of around 59.1 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors (see: all the Large Cap Blend ETFs here).
SPY has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Though most stocks in the fund’s portfolio have been in the deeper green so far this year, we have highlighted 10 stocks that led the rally and have a Zacks Rank #1 (Strong Buy) or #2:
You can see the complete list of today’s Zacks #1 Rank stocks here.
Best-Performing Stocks of SPY
L Brands Inc. : It has evolved from an apparel-based specialty retailer to a segment leader focused on women’s intimate and other apparel, personal care, beauty and home fragrance products. It has soared 94.3% so far this year and has an estimated earnings growth rate of 67.3% for the fiscal year (ending January 2022). The stock has a Zacks Rank #2 and a VGM Score of B.
Marathon Oil Corporation (MRO - Free Report) : This is a leading oil and natural gas exploration and production company with operations in the United States and Africa. It has jumped about 93% and has estimated earnings growth of 164.7% for this year. The stock has a Zacks ETF Rank #2 and a VGM Score of A (read: Will 2021 be the Best Year for Energy ETFs in Three Decades?).
Generac Holdings Inc. (GNRC - Free Report) : It is a leading manufacturer of power generation equipment, energy storage systems and other power products including portable, residential, commercial and industrial generators. The stock has surged 90% and has an estimated earnings growth of 56.7% for this year. It has a Zacks Rank #2 and a Growth Score of A.
Diamondback Energy Inc. (FANG - Free Report) : It is an independent oil and gas exploration & production company, with its primary focus on the Permian Basin. The stock has climbed nearly 82% so far this year and has estimated earnings growth of 196.7% for this year. It has a Zacks Rank #1 and a VGM Score of B.
Nucor Corporation (NUE - Free Report) : This company is a leading producer of structural steel, steel bars, steel joists, steel deck and cold finished bars in the United States. It has jumped about 80% so far this year and has an estimated earnings growth rate of 386.2% for this year. Nucor Corporation has a Zacks Rank #1 and a VGM Score of B.
Ford Motor Company (F - Free Report) : This company designs, manufactures, markets and services cars, trucks, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles. It has risen about 62% and has an estimated earnings growth rate of 158.5% for this year. The stock has a Zacks ETF Rank #1 and a VGM Score of B (read: ETF & Stocks to Ride on Auto Industry Strength).
Hess Corporation (HES - Free Report) : This global integrated energy company is engaged in exploration, production, development, transportation, purchase and sale of crude oil, natural gas liquids, and natural gas. It has gained about 58% so far this year and has an estimated earnings growth rate of 166.9% for this year. The stock has a Zacks Rank #1 and Growth Score of B.
Applied Materials Inc. (AMAT - Free Report) : It is one of the world’s largest suppliers of equipment for the fabrication of semiconductor, flat panel liquid crystal displays (LCDs), and solar photovoltaic (PV) cells and modules. The stock has climbed nearly 56% so far this year and has an estimated earnings growth rate of 57.1% for the fiscal year ending October 2021. It has a Zacks Rank #2 and a Momentum Score of B.
NVIDIA Corporation (NVDA - Free Report) : This company is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. The stock has gained 56% and has an estimated earnings growth rate of 59% for fiscal year (ending Jan 22). It has a Zacks Rank #2 and a Growth Score of A.
Charles River Laboratories International Inc. (CRL - Free Report) : This full service, early-stage contract research organization provides essential products and services to help pharmaceutical and biotechnology companies, government agencies and leading academic institutions globally accelerate their research and drug development efforts. The stock is up more than 53% so far this year and has an estimated earnings growth rate of 22.9% for this year. The stock has a Zacks Rank #2 and a Growth Score of B.
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 >>