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5 Stocks That Power S&P 500 ETF in August

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The S&P 500 hit a series of record highs in August despite bouts of volatility and uncertainty. It wrapped up its seventh-straight month of gains with the longest winning streak since the 10-month run that ended in December 2017. The index rose 2.9% last month and hit the 53rd record close of 2021 on Aug 30.

With this, the S&P 500 has gained 20.4% so far this year, representing the strongest performance over the first eight months of a calendar year since 1997 (read: Guide to the S&P 500 ETF Investing).

Renewed optimism over the global economic recovery after the first full U.S. approval of a COVID-19 vaccine made by Pfizer (PFE - Free Report) and BioNTech bolstered risk-on trade. This is because the full approval will help put brakes on the ongoing surge in COVID-19 Delta variant cases and lead to continued reopening of the economy. Additionally, strong corporate profit growth and ultra-easy monetary policies remain the major catalysts.

The Fed’s dovish stance also supported the rally to end the month. Chairman Jerome Powell in the Jackson Hole conference stated that the central bank is in no hurry to raise interest rates though it will gradually begin tapering $120 billion in monthly bond purchases by the end of the year.

Against such a backdrop, the proxy version of the S&P 500 Index, SPDR S&P 500 ETF Trust (SPY - Free Report) , is also hit record highs on several occasions and gained 2.4% last month. 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 6.3% of 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 $453.1 billion and charges 9 bps in fees per year (see: all the Large Cap Blend ETFs here).

The product trades in heavy volume of around 54.3 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors. SPY has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Though most stocks in the fund’s portfolio were in green last month, we have highlighted five stocks that led the rally and have a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold):

You can see the complete list of today’s Zacks #1 Rank stocks here.

Best-Performing Stocks of SPY

Paycom Software Inc. (PAYC - Free Report) : It is a provider of cloud-based human capital management software as a service solution for integrated software for both employee records and talent management processes. The stock soared 22.2% last month and has an estimated earnings growth rate of 25.2% for this year. It has a Zacks Rank #1 (read: Tech Sector Outperforms in August: 5 Best ETFs).

Ball Corporation (BLL - Free Report) : It is one of the world’s leading suppliers of metal packaging to the beverage, personal care and household products industries. The stock has surged 18.6% and has estimated earnings growth of 19.2% for this year. It has a Zacks Rank #2 and VGM Score of A.

Penn National Gaming Inc. (PENN): This company is a leading, multi-jurisdictional owner and manager of gaming and racing facilities with video gaming terminal operations, and a focus on slot machine entertainment. The stock climbed 18.6% last month and has estimated earnings growth of 164.2% for this year. It has a Zacks Rank #3 and VGM Score of B (read: Soaring Video Games Sales to Keep Boosting Gaming ETFs).

Etsy Inc. (ETSY - Free Report) : This e-commerce service provider operates a two-sided marketplace platform called Etsy.com. It jumped 17.8% in August and has estimated earnings growth of 10.4% for this year. Etsy has a Zacks Rank #3 and Growth Score of A.

Regeneron Pharmaceuticals Inc. (REGN): This biotechnology company is focused on the discovery, development and commercialization of treatments targeting serious medical conditions. It has gained 17.2% and has estimated earnings growth of 72.1% for this year. The stock has a Zacks ETF Rank #1 and Momentum Score of B (read: Tap the Red Hot Biotech Sector With These 2 Leveraged ETFs).