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5 Top-Ranked ETFs That Outperformed in July

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July was a banner month for the U.S. stock market as all the three major indices logged in the best month since 2020. Better-than-expected corporate earnings reports and falling bond yields brought back the lure for riskier assets. The Nasdaq Composite Index was the outperformer, climbing 12.4%, while the Dow Jones and the S&P 500 gained 6.7% and 9.1%, respectively.

While there have been winners in many corners of the space, we highlight five ETFs from different industries that gained last month and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). The funds are, namely, S&P Kensho Cleantech ETF (CTEX - Free Report) , SPDR S&P Semiconductor ETF (XSD - Free Report) , Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) , SPDR S&P Transportation ETF (XTN - Free Report) and Vanguard Mega Cap Growth ETF (MGK - Free Report) . These are likely to continue outperforming should the trends prevail.

Through Jul 29, Q2 results from 279 S&P 500 members or 55.8% of the index’s total membership are up 4.7% on 14.1% higher revenues, with 75.6% beating EPS estimates and 65.6% beating revenue estimates, per the latest Earnings Trends. This is faring better than expected and almost in line with the Q1 earnings and revenue growth of 5% and 14.1%, respectively (read: Stocks' Best Month Since 2020: Top ETF Areas of July).

Meanwhile, the 10-year yield dropped to 2.6% from 3% over the past month in the face of deteriorating economic conditions and recession fears. The world's largest economy is poised for a technical recession as GDP shrank by 0.9% in the second quarter, followed by a 1.6% decline in the first quarter. This might prompt the Fed to scale back its interest rate hiking cycle in the fall, resulting in risk-on trade.

The central bank raised interest rates by 75 bps to the range of 2.25% and 2.5% in its last meeting to fight inflation and said it is “strongly committed to returning inflation to its 2% objective.” It also hinted that it could slow the pace of its rate hike campaign at some point.

Further, commodity prices have also fallen on recessionary fears, thereby providing a boost to investor sentiment.

We have profiled the above-mentioned ETFs in detail below:

S&P Kensho Cleantech ETF (CTEX - Free Report) – Up 21.4%

S&P Kensho Cleantech ETF invests in companies involved in developing and building the green technologies that could power the future in areas like hydro, solar, wind, and geothermal by tracking the S&P Kensho Cleantech Index. It holds 30 stocks in its basket, with each making up for no more than 5% share. S&P Kensho Cleantech ETF has the largest allocations in industrials and information technology sectors.

S&P Kensho Cleantech ETF has accumulated $3.1 million in its asset base and charges 58 bps in annual fees. It trades in an average daily volume of 1,000 shares and has a Zacks ETF Rank #2.

SPDR S&P Semiconductor ETF (XSD - Free Report) – Up 19.9%

SPDR S&P Semiconductor ETF offers exposure to the semiconductor segment of the broad technology sector and tracks the S&P Semiconductor Select Industry Index. It holds 40 stocks in its portfolio, with each making up for not more than 4% share. SPDR S&P Semiconductor ETF has AUM of $1.3 billion and an average daily volume of about 74,000 shares.

SPDR S&P Semiconductor ETF charges 35 bps in fees per year and has a Zacks ETF Rank #1 (read: Time for Semiconductor ETFs on Senate's CHIPS-Plus Bill Passage?).

Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) – Up 19%

Consumer Discretionary Select Sector SPDR Fund offers exposure to the broad consumer discretionary space and tracks the Consumer Discretionary Select Sector Index. It holds 58 securities in its basket with key holdings in Internet & direct marketing retail, automobiles, specialty retail, and hotels, restaurants and leisure round off the next three spots with a double-digit allocation each.

Consumer Discretionary Select Sector SPDR Fund is the largest and most popular product in this space, with AUM of $15.1 billion and an average daily volume of around 6 million shares. It charges 0.10% in expense ratio and has a Zacks ETF Rank #1.

SPDR S&P Transportation ETF (XTN - Free Report) – Up 14.1%

SPDR S&P Transportation ETF tracks the S&P Transportation Select Industry Index, holding 49 stocks in its basket with none of the firms accounting for less than 3%. About 38% of the portfolio is dominated by trucking, while airlines, and air freight & logistics take 28% and 20% share, respectively.

With AUM of $506.2 million, SPDR S&P Transportation ETF charges 35 bps in fees per year from its investors and trades in a volume of around 53,000 shares a day.

Vanguard Mega Cap Growth ETF (MGK - Free Report) – Up 13.2%

With AUM of $11.4 billion, Vanguard Mega Cap Growth ETF offers diversified exposure to the largest growth stocks in the U.S. market by tracking the CRSP US Mega Cap Growth Index. It holds 99 securities in its basket, with none accounting for more than 15.2% of total assets. Information technology takes the largest share at 52.6%, while consumer discretionary takes 24.5% of assets (read: Tech ETFs Make A Solid Comeback in July).

Vanguard Mega Cap Growth ETF charges 7 bps in annual fees and trades in a good volume of around 351,000 shares a day on average. It has a Zacks ETF Rank #2.