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4 Sector ETFs & Stocks for Bountiful Returns in November
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After logging in the best month of this year, the U.S. stock market extended its rally to start November. All the three main indices hit record highs and are expected to continue their ascent. In fact, the Dow Jones Industrial Average closed above 36,000 for the first time.
November is historically the best month of the year. According to the Stock Trader's Almanac, the S&P 500 has gained an average of 1.7% in November since 1950. Additionally, November marks the start of the best six months for U.S. equities. Since 1945, the S&P 500 has climbed an average of 6.8% in the November through April period, according to Sam Stovall, chief investment strategist at CFRA.
Seasonality plays a vital role in the stock market surge during the six-month period (from November to April). Cyclical stocks from consumer discretionary, industrials, financials and technology tend to benefit the most. This is especially true as investors look for more growth rather than being defensive when cyclical trading starts. This implies that investors should buy stocks during this bustling time in the market (read: ETF Strategies to Cheer the Market Momentum in October).
Further, the bullish picture for November is backed by strong earnings and improving economic activity. Total earnings for the 192 S&P 500 members that have reported results so far are up 37.6% from the same period last year on 15.3% higher revenues, with 82.3% beating EPS estimates and 74% beating revenue estimates. Though the growth rates and beat percentages are below the same group of companies in the preceding period, these metrics are tracking well above historical averages. Additionally, a slew of upbeat economic data including strong consumer confidence and retail sales reflects a strong economy even though manufacturing activity slowed down in October.
As a result, we have highlighted one ETF and stock from each of the four sectors that could make a great play for investors. All these ETFs and stocks have a top Zacks Rank #1 (Strong Buy) or 2 (Buy). For the stocks, we have used a Growth Score of A, a top-ranked Zacks industry (top 45%), and an estimated double-digit earnings growth for the current year (see: all the Top Ranked ETFs).
Industrials
Industrial Select Sector SPDR (XLI - Free Report) : This is the most-popular ETF in the industrial space with AUM of $17.8 billion and an average daily volume of around 11.4 million shares. The fund follows the Industrial Select Sector Index, holding 73 stocks in its basket. It is well spread out across sectors with machinery, aerospace & defense, industrial conglomerates, and road & rail that make up for a double-digit share each. This ETF charges 12 bps in fees per year and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Will ETFs Suffer as US Manufacturing Slows Down in October?).
Deere & Company (DE - Free Report) : It is the world’s largest producer of agricultural equipment, manufacturing agricultural machinery since 1837 under the iconic John Deere brand with its signature green and yellow color scheme. The company has an estimated earnings growth rate of 17.4% for fiscal year (ending Oct 2022). The stock has a Zacks Rank #2.
Consumer Discretionary
Vanguard Consumer Discretionary ETF (VCR - Free Report) : This fund follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 294 stocks in its basket. Internet & direct marketing retail is the top sector with 26.7% of the portfolio while automobile manufacturers, restaurants and home improvement retail account for the next three spots. VCR charges investors 10 bps in annual fees while volume is good at nearly 68,000 shares a day. The product manages an asset base of about $7.2 billion and has a Zacks ETF Rank #1 with a Medium risk outlook.
lululemon athletica (LULU - Free Report) : This yoga-inspired athletic apparel company designs, manufactures and distributes athletic apparel and accessories for women, men and female youth. The stock has an estimated earnings growth rate of 59.6% for the fiscal year (ending January 2022) and carries a Zacks Rank #2.
Financials
Financial Select Sector SPDR Fund (XLF - Free Report) : This is the most-popular financial ETF with AUM of $45.3 billion and an average daily volumes of around 48 million shares. This fund follows the Financial Select Sector Index and provides exposure to companies in banks, capital markets, insurance, diversified financial services and consumer finance industries. It holds 65 stocks in its basket and charges investors 12 bps in annual fees (read: Should You Bank on Financial ETFs Now?).
CBRE Group (CBRE - Free Report) : This commercial real estate services and investment firm offers a wide range of services to tenants, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estates in all major metropolitan areas across the globe. The stock has estimated earnings growth of 59% for this year and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Technology
iShares U.S. Technology ETF (IYW - Free Report) : This ETF offers exposure to 150 U.S. electronics, computer software and hardware, and informational technology companies by tracking the Russell 1000 Technology RIC 22.5/45 Capped Index. The fund has amassed $9.2 billion in its asset base and charges 41 bps in fees and expenses. Volume is good as it exchanges nearly 500,000 shares in a day. Software & services takes the largest share at 43% while semiconductors & semiconductor equipment, tech hardware and equipment, and media & entertainment round off the next three spots. The fund has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 Technology ETFs At the Forefront of October's Market Rally).
Advanced Micro Devices (AMD - Free Report) : This semiconductor company has emerged as a strong challenger to NVIDIA’s dominance in the graphic processing unit or GPU market based on its Radeon technology. The stock has an estimated earnings growth rate of 105.4% for this year. It has a Zacks Rank #2.
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4 Sector ETFs & Stocks for Bountiful Returns in November
After logging in the best month of this year, the U.S. stock market extended its rally to start November. All the three main indices hit record highs and are expected to continue their ascent. In fact, the Dow Jones Industrial Average closed above 36,000 for the first time.
November is historically the best month of the year. According to the Stock Trader's Almanac, the S&P 500 has gained an average of 1.7% in November since 1950. Additionally, November marks the start of the best six months for U.S. equities. Since 1945, the S&P 500 has climbed an average of 6.8% in the November through April period, according to Sam Stovall, chief investment strategist at CFRA.
Seasonality plays a vital role in the stock market surge during the six-month period (from November to April). Cyclical stocks from consumer discretionary, industrials, financials and technology tend to benefit the most. This is especially true as investors look for more growth rather than being defensive when cyclical trading starts. This implies that investors should buy stocks during this bustling time in the market (read: ETF Strategies to Cheer the Market Momentum in October).
Further, the bullish picture for November is backed by strong earnings and improving economic activity. Total earnings for the 192 S&P 500 members that have reported results so far are up 37.6% from the same period last year on 15.3% higher revenues, with 82.3% beating EPS estimates and 74% beating revenue estimates. Though the growth rates and beat percentages are below the same group of companies in the preceding period, these metrics are tracking well above historical averages. Additionally, a slew of upbeat economic data including strong consumer confidence and retail sales reflects a strong economy even though manufacturing activity slowed down in October.
As a result, we have highlighted one ETF and stock from each of the four sectors that could make a great play for investors. All these ETFs and stocks have a top Zacks Rank #1 (Strong Buy) or 2 (Buy). For the stocks, we have used a Growth Score of A, a top-ranked Zacks industry (top 45%), and an estimated double-digit earnings growth for the current year (see: all the Top Ranked ETFs).
Industrials
Industrial Select Sector SPDR (XLI - Free Report) : This is the most-popular ETF in the industrial space with AUM of $17.8 billion and an average daily volume of around 11.4 million shares. The fund follows the Industrial Select Sector Index, holding 73 stocks in its basket. It is well spread out across sectors with machinery, aerospace & defense, industrial conglomerates, and road & rail that make up for a double-digit share each. This ETF charges 12 bps in fees per year and has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: Will ETFs Suffer as US Manufacturing Slows Down in October?).
Deere & Company (DE - Free Report) : It is the world’s largest producer of agricultural equipment, manufacturing agricultural machinery since 1837 under the iconic John Deere brand with its signature green and yellow color scheme. The company has an estimated earnings growth rate of 17.4% for fiscal year (ending Oct 2022). The stock has a Zacks Rank #2.
Consumer Discretionary
Vanguard Consumer Discretionary ETF (VCR - Free Report) : This fund follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 294 stocks in its basket. Internet & direct marketing retail is the top sector with 26.7% of the portfolio while automobile manufacturers, restaurants and home improvement retail account for the next three spots. VCR charges investors 10 bps in annual fees while volume is good at nearly 68,000 shares a day. The product manages an asset base of about $7.2 billion and has a Zacks ETF Rank #1 with a Medium risk outlook.
lululemon athletica (LULU - Free Report) : This yoga-inspired athletic apparel company designs, manufactures and distributes athletic apparel and accessories for women, men and female youth. The stock has an estimated earnings growth rate of 59.6% for the fiscal year (ending January 2022) and carries a Zacks Rank #2.
Financials
Financial Select Sector SPDR Fund (XLF - Free Report) : This is the most-popular financial ETF with AUM of $45.3 billion and an average daily volumes of around 48 million shares. This fund follows the Financial Select Sector Index and provides exposure to companies in banks, capital markets, insurance, diversified financial services and consumer finance industries. It holds 65 stocks in its basket and charges investors 12 bps in annual fees (read: Should You Bank on Financial ETFs Now?).
CBRE Group (CBRE - Free Report) : This commercial real estate services and investment firm offers a wide range of services to tenants, owners, lenders and investors in office, retail, industrial, multi-family and other types of commercial real estates in all major metropolitan areas across the globe. The stock has estimated earnings growth of 59% for this year and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Technology
iShares U.S. Technology ETF (IYW - Free Report) : This ETF offers exposure to 150 U.S. electronics, computer software and hardware, and informational technology companies by tracking the Russell 1000 Technology RIC 22.5/45 Capped Index. The fund has amassed $9.2 billion in its asset base and charges 41 bps in fees and expenses. Volume is good as it exchanges nearly 500,000 shares in a day. Software & services takes the largest share at 43% while semiconductors & semiconductor equipment, tech hardware and equipment, and media & entertainment round off the next three spots. The fund has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 Technology ETFs At the Forefront of October's Market Rally).
Advanced Micro Devices (AMD - Free Report) : This semiconductor company has emerged as a strong challenger to NVIDIA’s dominance in the graphic processing unit or GPU market based on its Radeon technology. The stock has an estimated earnings growth rate of 105.4% for this year. It has a Zacks Rank #2.