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The month of July was marked with wild swings in the stock prices. While concerns about the spread of the Delta variant of COVID-19 made investors jittery, a spate of upbeat corporate earnings and continued optimism bolstered risk-on trade.
In fact, the three major U.S. indices hit new peaks on strong earnings. This is especially true as the picture emerging from the Q2 earnings season is one of all-round strength, with aggregate total quarterly earnings on track to reach a new all-time record and impressive momentum on the revenue side. Earnings from 195 S&P 500 companies reported so far are up 105% on 22.3% revenues with 90.8% beating EPS estimates and 86.2% topping revenue estimates.
Looking at Q2 as a whole, combining the actual results for the 195 index members that have reported with estimates for the still-to-come companies, total S&P 500 earnings are expected to be up 83.9% from the same period last year on 21.3% higher revenues (read: A Spread of Top S&P 500 ETFs to Tap Solid Q2 Earnings Growth).
Investors should note that the strong earnings are currently acting as the major tailwind for the stock market keeping aside the fears of a new wave of coronavirus, which is spreading rapidly all over the world. The pandemic resurgence has sparked fears of renewed shutdowns and the reintroduction of indoor mask mandates, distancing and occupancy limits in certain parts of the country, thus raising concerns over a protracted economic recovery.
Against such a backdrop, we have highlighted five ETFs from various sectors that outperformed in July and are likely to continue doing so, should the trends prevail.
Rare earth metals are getting a boost from an accelerating shift to new technologies such as electric vehicles. About 27% of rare metals are used in the production of neomagnets, which are the essential components in electric vehicles (EVs). REMX offers exposure to companies engaged in producing, refining and recycling of rare earth and strategic metals and minerals. It follows the MVIS Global Rare Earth/Strategic Metals Index, holding 20 stocks in its basket. The ETF has AUM of $890.6 million and an average daily volume of 240,000 shares. From a country look, Chinese firms dominate the portfolio with a 39.2% share, closely followed by Australia (24%) and United States (16.8%). The product charges 59 bps in annual fees.
Global X Lithium & Battery Tech ETF (LIT - Free Report) – Up 10.6%
Lithium prices have been soaring on the back of heavy demand for lithium batteries, which is used in electric vehicles. This product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production by tracking the Solactive Global Lithium Index. It holds 38 securities in its basket with Chinese firms taking the largest share at 48.9%, followed by United States (20.3%) and South Korea (9.6%). LIT charges investors 75 bps in annual fees and has amassed $4.3 billion in AUM. It trades in an average daily volume of 689,000 shares (read: Small-Cap ETFs That More Than Doubled in a Year).
Higher rents due to shortage of homes are driving the real estate sector higher. Additionally, a resurgence in the COVID-19 cases led to investors’ flight to a defensive sector like real estate. JRE, which newly debuted in the space last month, has accumulated more than $10 billion in its asset base and trades in an average daily volume of 5,000 shares. It is an actively managed ETF seeking compelling outperformance by investing in REITs and real estate related businesses. The fund holds 21 stocks in its basket and charges 65 bps in annual fees.
Wisdomtree Cybersecurity Fund (WCBR - Free Report) – Up 5.8%
Digitization has increased the need for cybersecurity given increased instances of security breaches and threats. Resurgence in the COVID-19 cases renewed momentum in the space. This fund has newly debuted in the space and has attracted $30.9 million in its asset base in just six months. It targets exposure to companies driving innovation in cybersecurity technologies by tracking the WisdomTree Team8 Cybersecurity Index. The ETF holds 25 stocks in its basket and charges 45 bps in annual fees It trades in an average daily volume of 20,000 shares (read: Delta Variant to Spark Rally in Stay-At-Home ETFs).
Being a 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 a safe haven amid economic or political turmoil. With AUM of $12 billion, this fund provides exposure to a small basket of 28 securities by tracking the Utilities Select Sector Index. Electric utilities takes the top spot in terms of sectors at 63.8%, closely followed by multi utilities (30%). The product charges 12 bps in annual fees and sees a massive volume of around 11 million shares on average. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
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5 Sector ETFs That Crushed the Market in July
The month of July was marked with wild swings in the stock prices. While concerns about the spread of the Delta variant of COVID-19 made investors jittery, a spate of upbeat corporate earnings and continued optimism bolstered risk-on trade.
In fact, the three major U.S. indices hit new peaks on strong earnings. This is especially true as the picture emerging from the Q2 earnings season is one of all-round strength, with aggregate total quarterly earnings on track to reach a new all-time record and impressive momentum on the revenue side. Earnings from 195 S&P 500 companies reported so far are up 105% on 22.3% revenues with 90.8% beating EPS estimates and 86.2% topping revenue estimates.
Looking at Q2 as a whole, combining the actual results for the 195 index members that have reported with estimates for the still-to-come companies, total S&P 500 earnings are expected to be up 83.9% from the same period last year on 21.3% higher revenues (read: A Spread of Top S&P 500 ETFs to Tap Solid Q2 Earnings Growth).
Investors should note that the strong earnings are currently acting as the major tailwind for the stock market keeping aside the fears of a new wave of coronavirus, which is spreading rapidly all over the world. The pandemic resurgence has sparked fears of renewed shutdowns and the reintroduction of indoor mask mandates, distancing and occupancy limits in certain parts of the country, thus raising concerns over a protracted economic recovery.
Against such a backdrop, we have highlighted five ETFs from various sectors that outperformed in July and are likely to continue doing so, should the trends prevail.
VanEck Vectors Rare Earth/Strategic Metals ETF (REMX - Free Report) – Up 21.1%
Rare earth metals are getting a boost from an accelerating shift to new technologies such as electric vehicles. About 27% of rare metals are used in the production of neomagnets, which are the essential components in electric vehicles (EVs). REMX offers exposure to companies engaged in producing, refining and recycling of rare earth and strategic metals and minerals. It follows the MVIS Global Rare Earth/Strategic Metals Index, holding 20 stocks in its basket. The ETF has AUM of $890.6 million and an average daily volume of 240,000 shares. From a country look, Chinese firms dominate the portfolio with a 39.2% share, closely followed by Australia (24%) and United States (16.8%). The product charges 59 bps in annual fees.
Global X Lithium & Battery Tech ETF (LIT - Free Report) – Up 10.6%
Lithium prices have been soaring on the back of heavy demand for lithium batteries, which is used in electric vehicles. This product provides global exposure to a broad range of firms engaged in lithium mining, refining and battery production by tracking the Solactive Global Lithium Index. It holds 38 securities in its basket with Chinese firms taking the largest share at 48.9%, followed by United States (20.3%) and South Korea (9.6%). LIT charges investors 75 bps in annual fees and has amassed $4.3 billion in AUM. It trades in an average daily volume of 689,000 shares (read: Small-Cap ETFs That More Than Doubled in a Year).
U.S. Real Estate ETF (JRE - Free Report) – Up 7.1%
Higher rents due to shortage of homes are driving the real estate sector higher. Additionally, a resurgence in the COVID-19 cases led to investors’ flight to a defensive sector like real estate. JRE, which newly debuted in the space last month, has accumulated more than $10 billion in its asset base and trades in an average daily volume of 5,000 shares. It is an actively managed ETF seeking compelling outperformance by investing in REITs and real estate related businesses. The fund holds 21 stocks in its basket and charges 65 bps in annual fees.
Wisdomtree Cybersecurity Fund (WCBR - Free Report) – Up 5.8%
Digitization has increased the need for cybersecurity given increased instances of security breaches and threats. Resurgence in the COVID-19 cases renewed momentum in the space. This fund has newly debuted in the space and has attracted $30.9 million in its asset base in just six months. It targets exposure to companies driving innovation in cybersecurity technologies by tracking the WisdomTree Team8 Cybersecurity Index. The ETF holds 25 stocks in its basket and charges 45 bps in annual fees It trades in an average daily volume of 20,000 shares (read: Delta Variant to Spark Rally in Stay-At-Home ETFs).
Utilities Select Sector SPDR (XLU - Free Report) – Up 4.9%
Being a 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 a safe haven amid economic or political turmoil. With AUM of $12 billion, this fund provides exposure to a small basket of 28 securities by tracking the Utilities Select Sector Index. Electric utilities takes the top spot in terms of sectors at 63.8%, closely followed by multi utilities (30%). The product charges 12 bps in annual fees and sees a massive volume of around 11 million shares on average. It has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.