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4 Sector ETFs Gaining Double Digits Amid September Selling

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With only a few trading days left, September, known for being a weak month for stock markets, has turned out to be brutal given a myriad of woes. These include concerns over accelerating coronavirus infections, renewed inflation fears, signs of a slowdown in China, potential for high corporate tax rates and Fed’s tapering worries.

Concerns over the financial contagion of the potential failure of China’s Evergrande property group and the ongoing debates over the debt limit in Washington also made investors’ jittery early this week. But these worries seemed to ease with the China Evergrande deal on some of its looming debt payments as well as the House passing a bill to avert government shutdown.

Notably, the S&P 500 Index logged in its worst day on Sep 20 since May 12 after three consecutive weekly declines. Every sector in the index is on track to end the month in negative territory for the first time since March 2020. Meanwhile, the five biggest tech titans — including Microsoft MSFT, Google-owner Alphabet GOOGL, Amazon.com AMZN, Apple AAPL, and Facebook FB collectively shed more than $500 billion since the Nasdaq 100 peaked on Sep 7 (read: September's Weak History Turning True: 5 ETF Buying Zones).

The S&P 500 has dropped 3.7% so far in September, dragged down by a 7.2% decline in the materials sector. If the loss persists for the remaining trading days of the month, it will be the index’s first monthly decline since January.

In such a scenario, a few sector ETFs are still trading in green. We have highlighted four that have gained in double-digits over the past month and could be compelling picks in the weeks ahead even if September selling continues.

North Shore Global Uranium Mining ETF (URNM - Free Report) – Up 44.9%

Uranium stocks have been on a tear buoyed by growing social media attention, restart of nuclear reactors in Japan after 10 years and the growing uranium supply deficit, being accelerated by COVID-19 pandemic related production cuts (read: Why Uranium Stocks & ETFs are Going Nuclear).

This ETF provides exposure to companies that are involved in the mining, exploration, development and production of uranium, as well as companies that hold physical uranium or other non-mining assets. It follows the North Shore Global Uranium Mining Index and charges investors 85 bps in annual fee. The ETF holds 35 stocks in its basket with a heavy concentration on the top two firms accounting for a combined 27.3% share while other make up for no more than 9.7% share. It has accumulated $780.1 million in its asset base and trades in a good volume of 298,000 shares per day on average.

SonicShares Global Shipping ETF (BOAT - Free Report) – Up 12.2%

The global shipping industry is enjoying a smooth sailing due to supply chain disruptions around the world caused by the pandemic. Port congestion and delays are the primary drivers as the pandemic has halted the movement of ships and will continue to do so at least in the near term.

BOAT provides pure-play exposure to the global maritime shipping industry by tracking the Solactive Global Shipping Index. The index consists of global shipping companies engaged in the maritime transportation of goods and raw materials, including consumer and industrial products, vehicles, dry bulk, crude oil and liquefied natural gas. The product holds 53 stocks in its basket with heavy concentration on the top two firms at 10% share each. It has amassed $10.1 million in its asset base since its inception last month and charges 69 bps in annual fees. The fund trades in average daily volume of 17,000 shares (read: What's Behind the Smooth Sailing of the Top ETF of 2021?).

Invesco DWA Energy Momentum ETF (PXI - Free Report) – Up 11.5%

The energy sector has gained momentum on oil price surge driven by tightening supply and expectations of an increase in demand as vaccination roll-outs widen. While many of the energy ETFs have been rising, PXI is the biggest beneficiary. This fund tracks the Dorsey Wright Energy Technical Leaders Index, which is designed to identify companies that are showing relative strength (momentum). It charges 60 bps in annual fees and trades in a good volume of 139,000 shares a day on average. The fund has 36 stocks in its basket with each making up for less than 4.8% of assets and AUM of $64.1 million. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook.

Simplify Volt Fintech Disruption ETF (VFIN - Free Report) – Up 10.1%

Digitalization has been powering this niche ETF. It seeks to offer exposure to the most disruptive fintech companies that are on the forefront of cashless payments. It aims to invest close to 25% across Square (SQ) stock and Square call options while targeting 25% in Lemonade (LMND) stock and Lemonade call options. A modest put option overlay is designed to help mitigate sharp market crashes. The product has accumulated $2.7 million since its inception in late December and charges 0.95% in annual fees. It trades in an average daily volume of 2,000 shares.

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