The 2016 solid performance of the U.S. stocks has continued into 2017, that too with huge optimism. While the rally has been broad-based, growth stocks are easily leading the way to start the year. This is especially true as the ultra-popular growth fund (QQQ - Free Report) climbed 3.5% in the first few trading sessions compared with gains of 0.4% for the value fund IWD and 1.3% for the core fund (SPY - Free Report) .
In fact, most of the growth stocks and ETFs are hitting all-time highs this year. This outperformance is likely to continue for the rest of the year (read: Large-Cap Growth ETFs Warming Up This Winter).
The U.S. economy is clearly on solid footing thanks to an impressive labor market, rising wages, slowly rising inflation and increasing consumer spending. Americans have an optimistic view about the economy with confidence hitting the highest level since 2001. Additionally, the combination of other factors like return to the earnings growth era, the jump in oil price, Trump’s pro-growth policies and the rise in interest rates have added to the strength.
In particular, Trump’s promise to accelerate economic growth, increase inflation, spend big on infrastructure, reduce regulations, cut taxes and create more jobs in the country have instilled strong confidence in the market. These moves will likely flood U.S. companies with excess cash and earnings growth, resulting in a stock market rally in the months ahead.
On the other hand, the historic OPEC oil output cut deal could end the two-year crude-oil rout and stabilize the oil market, infusing fresh optimism into the energy sector. If these aren’t enough, earnings for the S&P 500 are expected to return to double-digit growth of 12.1% in 2017. This is much higher than the expected earnings decline of 2.1% in 2016 and 1% decline recorded in 2015 (read: 5 ETF Investment Ideas for 2017).
In such a scenario, when broader market sentiments have a predetermined positive direction, there is hardly any strategy as gainful as growth investing. This is basically a momentum play and a great strategy in a trending market (a market characterized by a prolonged uptrend). Growth stocks refer to those high quality stocks that are likely to witness revenue and earnings increasing at a faster rate than the industry average. These stocks harness their momentum in earnings to create a positive bias in the market, resulting in rocketing share prices.
Given this, it seems that growth investing will continue to lure investors’ throughout the year. We have presented five ETFs & stocks that that could be excellent plays to ride out the Trump euphoria and strengthening domestic fundamentals.
All these funds have a Zacks ETF Rank of 3 or ‘Hold’ rating, suggesting that these will perform better in the months ahead. Additionally, these ETFs come with a lower cost and liquidity is not an issue given their good average trading volume.
Schwab U.S. Large-Cap Growth ETF (SCHG - Free Report)
This ETF targets the large cap growth segment by tracking the Dow Jones U.S. Large Cap Growth Total Stock Market Index.
AUM: $3.3 billion
Expense Ratio: 0.04%
Average Trading Volume (as per xtf.com): 232,706
YTD Return: 2.69%
Vanguard Growth ETF (VUG - Free Report)
This ETF follows the CRSP US Large Cap Growth Index.
AUM: $23 billion
Expense Ratio: 0.08%
Average Trading Volume: 629,329
YTD Return: 2.54%
iShares Core Russell U.S. Growth ETF (IUSG - Free Report)
This product provides exposure to growth stocks, whose earnings are expected to grow at an above-average rate relative to the market. Currently, it tracks the Russell 3000 Growth Index but beginning on or around January 23, 2017, it will track a new index –– the S&P 900 Growth Index.
AUM: $1.3 billion
Expense Ratio: 0.05%
Average Trading Volume: 265,908
YTD Return: 2.40%
Vanguard Mid-Cap Growth ETF (VOT - Free Report)
This fund offers exposure to the mid cap segment and follows the CRSP US Mid Cap Growth Index.
AUM: $3.6 billion
Expense Ratio: 0.08%
Average Trading Volume: 119,837
YTD Return: 2.29%
Vanguard Small-Cap Growth ETF (VBK - Free Report)
This ETF measures the performance of the small cap segment and tracks the CRSP US Small Cap Growth Index (read: 5 Small Cap ETFs and Stocks to Play January & Trump Effect).
AUM: $5.3 billion
Expense Ratio: 0.08%
Average Trading Volume: 221,804
YTD Return: 2.16%
We highlight five stocks with a top Zacks Rank #1 (Strong Buy), a Growth Style Score of A and average daily volume of more than a million shares that are likely to see immense price appreciation.
W&T Offshore Inc. (WTI - Free Report)
This is an independent oil and natural gas company focused primarily on the Gulf of Mexico area, including the deep water.
Market Cap: $440 million
2017 Earnings Growth Rate: 62.47%
Average Trading Volume (as per the Zacks): 3,223,308
YTD Return: 15.88%
Facebook Inc. (FB - Free Report)
This company operates as a social networking website worldwide.
Market Cap: $358.4 billion
2017 Earnings Growth Rate: 31.32%
Average Trading Volume: 16,631,712
YTD Return: 8.08%
The Chemours Company (CC - Free Report)
This is a provider of performance chemicals in North America, the Asia Pacific, Europe, the Middle East, Africa, and Latin America.
Market Cap: $4.25 billion
2017 Earnings Growth Rate: 66.01%
Average Trading Volume: 4,886,555
YTD Return: 5.70%
Applied Materials Inc. (AMAT - Free Report)
Applied Materials develops, manufactures, markets and services semiconductor wafer fabrication equipment and related spare parts for the worldwide semiconductor industry (read: Will Semiconductor ETFs Repeat This Year's Success in 2017?).
Market Cap: $35.67 billion
2017 Earnings Growth Rate: 38.76%
Average Trading Volume: 7,377,485
YTD Return: 2.66%
Broadcom Limited (AVGO - Free Report)
This company designs, develops, and supplies a range of complex digital and mixed signal complementary metal oxide semiconductor based devices and analog III-V based products worldwide.
Market Cap: $72.04 billion
2017 Earnings Growth Rate: 23.72%
Average Trading Volume: 2,391,954
YTD Return: 2.15%
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