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Beyond Miners, 5 ETFs Crushing the Market to Start Q2

SBIO BNO XOP

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Overriding concerns over weak corporate earnings, U.S. stocks hit fresh highs of 2016. This is especially true as conservative earnings estimates are actually setting the stage for positive surprises.

In fact, a handsome earnings beat by one of the six largest banks – J.P. Morgan (JPM) – spread optimism into financial sector, which is the backbone of the global economy. As per the Zacks Earnings Trend, earnings beat ratio for 8.8% of the S&P 500 companies that have reported so far is impressive at 71.9% (read: Q1 Earnings Appear Dull: ETFs & Stocks to Bet On).
 
Additionally, better-than-expected trade data in China eased global growth fears, sending the stocks higher. Further, stabilization of crude oil at around $40 per barrel is the greatest achievement in the current oversupplied oil market. Though the dollar has been weakening since the start of the second quarter, it has gained some momentum this week on more stimulus hopes from Bank of Japan (read: 5 ETFs to Buy if Oil Stays at $40).

Apart from these recent developments, the dovishness of the Fed, an accelerating job market, a pick-up in inflation and increasing consumer confidence have continued to brace the market. Meanwhile, the appeal for government bonds and precious metals has diminished on risk-on investors’ sentiment.

That being said, we highlight five ETFs that are surging to start the second quarter and are expected to continue this trend.

ALPS Medical Breakthroughs ETF ((SBIO - Free Report) ) – Up 11.5%

This fund targets companies with one or more drugs in Phase II or Phase III FDA clinical trials by tracking the Poliwogg Medical Breakthroughs Index. It is a small cap centric fund, having amassed $104.2 million in its asset base. The product holds 95 stocks in its basket with a well-diversified portfolio as each security holds less than 4.6% of assets. The product charges 50 bps in fees per year from investors and trades in a moderate average daily volume of about 77,000 shares. It has a Zacks ETF Rank of 3 or ‘Hold' rating (read: Biotech Regain Health: ETFs to Prescribe).
 
WisdomTree Weak Dollar U.S. Equity Fund – Up 10.3%

This fund offers exposure to export-oriented companies that may benefit from a weakening U.S. dollar by tracking the WisdomTree Weak Dollar U.S. Equity Index. It holds 201 securities in its basket with none accounting for more than 1.84% of assets. However, about one-fourth of the portfolio is dominated by information technology while industrials, health care, consumer discretionary and materials round off the next four spots with a double-digit exposure each. USWD is an unpopular an illiquid fund with AUM of $1.2 million and average daily volume of under 1,000 shares. Expense ratio came in at 0.33%.

SPDR SSGA Risk Aware ETF - Up 10.3%

This is an actively managed ETF that seeks to provide capital appreciation and competitive returns compared to the broad U.S. equity market. Holding 90 stocks in its portfolio, the fund is moderately concentrated across the firms with each holding less than 5.4% share. From a sector look, consumer discretionary, health care, consumer staples, financial services and utilities are the top sectors with a double-digit allocation each. It has managed $2 million in its asset base and charges 50 bps in annual fees. Volume is light exchanging less than 1,000 shares a day on average.

United States Brent Oil Fund (BNO - Free Report) – Up 9.2%

This fund provides direct exposure to the spot price of Brent crude oil on a daily basis through futures contracts. It has amassed $121.3 million in its asset base and trades in a good volume of roughly 267,000 shares a day. The ETF charges 75 bps in annual fees and expenses (read: Top ETF Stories of First Quarter 2016).
 
SPDR S&P Oil & Gas Exploration & Production ETF (XOP - Free Report) - Up 9.2%
 
This fund provides an equal weight exposure to 60 firms by tracking the S&P Oil & Gas Exploration & Production Select Industry Index. Each holding makes up for less than 2.8% of the total assets. XOP is one of the largest and popular funds in the energy space with AUM of over $2 billion and expense ratio of 0.35%. It trades in heavy volume of around 19.1 million shares a day on average. The fund has a Zacks ETF Rank of 5 or ‘Strong Sell’ rating (read: Crude Back to $40: Can Energy ETFs Sustain Their Rally?).
 
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