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4 ETF Areas Near One-Year High With More Room for Growth

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Wall Street has been hovering around a record high level due to earnings strength, the ebbing pandemic, the economic reopening and the associated economic growth. But the Fed is also preparing for a policy tightening, which may curb the winning momentum of equities. Against this backdrop, we highlight four ETF areas that are currently hovering around a 52-week high level and still hold potential for a further rally.

The ETFs are the likes of S&P Homebuilders SPDR (XHB - Free Report) , S&P Semiconductor SPDR ETF (XSD - Free Report) , DWA Consumer Cyclicals Momentum Invesco ETF (PEZ - Free Report) and Midcap Growth ETF Vanguard (VOT - Free Report) hailing from the investing areas — homebuilding, semiconductor, retail and mid-cap growth, respectively. Let’s take a deeper look.

Homebuilding

The broader housing sector appears in decent shape as homebuyers’ demand is exceeding some builders’ current capacity. D.R. Horton Inc. (DHI - Free Report) , Beazer Homes (BZH - Free Report) and Meritage Homes Corporation (MTH - Free Report) beat overall this earnings reporting season.  Meanwhile, the home furnishing industry is appearing as a lucrative one.

The recent volley of data points also paints a rosy picture about the industry. Existing-home sales in the United States (which makes up the main part of the whole industry) jumped 7% to a seasonally adjusted annual rate of 6.29 million units in September 2021, the strongest level in eight months.

Strong demand in a still-low-rate environment has helped the S&P Homebuilders SPDR (XHB - Free Report) . S&P Homebuilders SPDR ETF has a Zacks Rank #2 (Buy). The upbeat operating backdrop calls for a prolonged rally in XHB.

Semiconductor

The semiconductor space has been on a tear as the pandemic has bolstered the demand for chips, leading to the worst global shortage in many years. Corporate earnings from the likes of Nvidia (NVDA), Qualcomm (QCOM) and Advanced Micro Devices (AMD) have been upbeat. The recent upsurge in the electric vehicle industry and increased awareness for clean energy have also made the semiconductor industry an investors’ darling (read: Semiconductor ETFs Flying High on Slew of Q3 Earnings Beat).

S&P Semiconductor SPDR ETF (XSD - Free Report) – Zacks Rank #1 (Strong Buy)

The ETF XSD holds a total of 40 stocks. Wolfspeed (3.74%), SunPower (3.49%) and Silicon Laboratories (3.38%) are the top holdings of S&P Semiconductor SPDR ETF. XSD charges 35 bps in fees.

Dynamic Semiconductors Invesco ETF (PSI - Free Report) – Zacks Rank #1

NVIDIA (5.76%), KLA Corp. (5.27%) and Applied Materials (4.97%) round out the top three spots of Dynamic Semiconductors Invesco ETF. The ETF PSI charges 56 bps in fees.

Consumer Discretionary/Retail

Market watchers are anticipating an impressive retail sales figure in 2021 along with a strong holiday season. The National Retail Federation expects holiday sales to grow 8.5-10.5% in November and December to $843.4-$859 billion. This is higher than last year’s growth of 8.2% and the five-year average of 4.4%. Of these, online and other non-store sales are likely to increase 11-15% to $218.3-$226.2 billion, up from $196.7 billion last year.

Consumers plan to spend an average of $997.73 this year, up from $997 from last year thanks to the economic reopening. Retailers are also strongly gearing up for the start to the holiday season that is considered a busy season for many industry players. This is making funds like RTH, PEZ and FTXD impressive bets (read: 5 ETFs to Buy This Holiday Season for Gift of Good Returns).

DWA Consumer Cyclicals Momentum Invesco ETF (PEZ - Free Report) – Zacks Rank #3 (Hold)

Signet Jewelers (4.43%), Domino's Pizza (4.04%) and Crocs (3.91%) round out the top three positions of PEZ. The 30-stock DWA Consumer Cyclicals Momentum Invesco ETF charges 60 bps in fees.

Vaneck Retail ETF (RTH - Free Report) – Zacks Rank #2

Amazon (18.6%), Home Depot (16.4%) and Lowe’s (5.57%) are the top three holdings ofVaneck Retail ETF. RTH charges 35 bps in fees.

Mid-Cap Growth

The mid-cap segment offers the best of the both worlds — large caps and small caps. Notably, the smaller-cap stock has the potential to rally as the domestic economy gains steam. Moreover, smaller stocks are more undervalued. On the other hand, large caps offer safety and are the beneficiaries of global economic reopening. Since mid caps have the attributes of both segments, the following ETFs have more room to run.

Midcap Growth ETF Vanguard (VOT - Free Report) – Zacks Rank #2

Vanguard Midcap Growth ETF has Dexcom, Marvell Technology and MSCI at its top three holdings. Technology (30.83%), Industrials (18.1%), Health Care (16.34%) and Consumer Discretionary (13.94%) hold the top three spots in VOT.

Nushares ESG Midcap Growth ETF (NUMG - Free Report)

The underlying TIAA ESG USA Mid-Cap Growth Index uses a rules-based methodology that provides investment exposure that generally replicates that of mid-cap growth benchmarks through a portfolio of securities that adhere to predetermined ESG, controversial business involvement and low-carbon screening criteria. Information Technology (36.65%), Health Care (19.48%), Industrials (13.52%) and Consumer Discretionary (12.20%) are the top sectors of NUMG.