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5 Top-Ranked ETFs That Outperformed the Market in September

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Wall Street has been witnessing some muted performances in the seasonally weak month of September. Other concerns that kept investors worried include rising coronavirus cases due to the highly contagious Delta variant, surging inflation levels, uncertainty surrounding the Federal Reserve’s meeting and its decision on tapering the fiscal stimulus along with China’s property crisis.

Notably, the Dow Jones Industrial Average is down 1.4% in September so far. Other broad market indices, the S&P 500 and the Nasdaq Composite, have also declined 1.8% and 1.9%, respectively, in September.

Against this backdrop, let’s take a look at some top-ranked ETFs that have been outperforming the market in September:

First Trust Natural Gas ETF (FCG - Free Report) — up 21.9% in the past month

The cold wave from Arctic region accelerates electricity demand across the United States, putting focus on natural gas. Considering the scenario, forecasts of colder-than-expected temperatures in the United States are expected to drive natural gas prices. U.S. natural gas futures have now risen to a seven-year high due to the supply crunch heading into the winter-heating season.

The fund seeks investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the ISE-Revere Natural Gas Index. It has AUM of $312.9 million and charges 60 basis points (bps) in annual fees. It carries a Zacks ETF Rank #2 (Buy) with a High-risk outlook (read: 7 Best ETFs of the First Nine Months of 2021).

Vanguard Energy ETF (VDE - Free Report) — up 9.2%

The coronavirus vaccine rollout is gradually helping control the spread of the outbreak across the globe. Accordingly, the global demand and economic growth levels are on the path of recovery from the pandemic-led slump. The optimism surrounding the gradual reopening of global economies and increasing demand is painting a rosy picture for cyclical sectors. Consequently, the energy sector has been gaining investors’ attention on the latest rally in oil prices. Notably, shrinking crude inventories, supply disruption in the Gulf of Mexico following a couple of hurricanes and surging fuel demand are pushing oil prices higher. 

The fund seeks to track the performance of the MSCI US Investable Market Energy 25/50 Index. It has AUM of $5.09 billion and charges 10 bps in annual fees. It carries a Zacks ETF Rank #2 with a High-risk outlook (read: Energy ETFs to Gain on Upbeat Exxon, Chevron Q2 Earnings).

Invesco Dynamic Semiconductors ETF (PSI - Free Report) — up 3.6%

The semiconductor industry has been increasingly gaining investors’ attention backed by its bright prospects. The coronavirus-induced work-from-home and web-based learning trends have spurred demand for chips from PC manufacturers and data-center operators. Data-center operators have increased their capacities to meet the surging demand for cloud services. The companies that provide design and other components for chip making are expected to gain from this trend. Growing adoption of cloud computing and the ongoing infusion of artificial intelligence, machine learning and Internet of Things are expected to keep the sector brewing with opportunities in 2021.

This fund tracks the Dynamic Semiconductor Intellidex Index, holding 31 securities in its basket. The product has AUM of $707.7 million. Its expense ratio is 0.57%. PSI sports a Zacks ETF Rank #1 (Strong Buy), with a High-risk outlook (read: Buy the Dip With These Top-Ranked ETFs).

SPDR S&P Transportation ETF (XTN - Free Report) — up 2.9%

This holiday season appears to be a comparatively strong period for retailers. Moreover, the growing inclination toward ecommerce has resulted in a wider reach for players in the retail space. That’s why there is likely to be a surge in demand for freight services to deliver the products ordered online.

The United States will likely relax travel restrictions for international visitors who are vaccinated against COVID-19 in November, including those from the U.K. and EU, the White House said recently, per a CNBC article. Foreigners visiting the United States will have to present a vaccination proof and a negative COVID-19 test taken within three days of travel. The latest White House announcement came post the peak summer travel season, which signals at strong holiday travel demand.

The fund seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&PTransportation Select Industry Index. It has AUM of $493.9 million and charges 35 bps in annual fees. It carries a Zacks ETF Rank #2 with a High-risk outlook (read: Labor Shortages Hit FedEx Q1 Earnings: ETFs in Focus).

The Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) — up 2.4%

Amid the current market environment, investors looking to rake in some good returns can consider the consumer discretionary sector. The U.S. consumer sentiment also marginally improved despite concerns about the surging coronavirus cases and inflationary levels. The University of Michigan’s preliminary consumer sentiment inched up to 71 in September from 70.3 last month, per a BloombergQuint article.

The strength in consumer sentiment can be the major driving force behind the solid performance of the consumer discretionary space as consumers are expected to splurge this holiday season after being restricted for more than a year. Notably, a number of restaurants and retailers that have resumed business after restrictions were relaxed in the United States should see some accelerated demand and footfall. Also, the leisure and entertainment space should see a rebound as casinos and amusement parks have started welcoming visitors.

This is the largest and most popular product in the consumer discretionary space, with AUM of $20.35 billion. It tracks the Consumer Discretionary Select Sector Index. The fund charges 12 bps in fees per year and carries a Zacks ETF Rank #2, with a Medium-risk outlook (read: Can Consumer Discretionary ETFs Make Good Bets for Q4?).