The popular adage “Sell in May and Go Away” proved wrong this year as Wall Street is on track to log the best May in nine years. With just one trading session left to the month, the S&P 500 gained 3.3%, Dow Jones is up 3.1%, and Nasdaq Composite Index has moved up by 5.1% in May.
Power-packed earnings and easing U.S.-China trade fears led to the rally though bouts of political news like deepening crisis in Italy and renewed sanction on Iran as well as higher yields continued to keep the market at check. In particular, rising oil prices infused optimism in the energy sector and gave a huge boost to the broad stock market.
That said, a few sectors have easily crushed the market this month. Below we have highlighted such sector ETFs that have gained handsomely in May and could be better plays in the months ahead should the trends prevail.
ARK Genomic Revolution Multi-Sector ETF (ARKG - Free Report)
The biotech sector got a dual boost from encouraging fundamentals including a wave of mergers & acquisitions, and its non-cyclical nature, which provides a defensive tilt to the portfolio in a turbulent market. Additionally, Trump’s most-awaited plan to lower drug prices has added to the strength. While almost all the healthcare ETFs surged, ARKG emerged as the winner, climbing 13.6% (read: Pharma & Biotech ETFs Soar on Trump's Drug Plan).
This is an actively managed ETF focusing on companies that are expected to benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments, improvements and advancements in genomics into their business. The fund holds 38 stocks in its basket with heavy concentration on the top firm at 11.2%. Other firms hold no more than 7.52% share. The product has amassed $176.2 million in its asset base and trades in a good average daily volume of around 93,000 shares. The expense ratio comes in at 0.75%.
First Trust Nasdaq Semiconductor ETF (FTXL - Free Report)
After taking a huge beating, the semiconductor corner of the broad technology market once again heated up in May due to reduced tensions between the United States and China. This is because U.S. chipmakers have the largest sales exposure to China. Additionally, the string of better-than-expected results from industry players such as Intel (INTC - Free Report) , Texas Instruments (TXN - Free Report) , MKS Instruments (MKSI - Free Report) , Lam Research (LRCX - Free Report) and Microchip Technology (MCHP - Free Report) instilled optimism in the space.
FTXL offers exposure to the most-liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. Holding 30 stocks in its basket, it has diverse exposure across components with each holding less than 10% of the assets. FTXL has accumulated $44.4 million in AUM while average trading volume is light at around 19,000 shares. It charges 0.60% in expense ratio and has a Zacks ETF Rank #1 (Strong Buy). The ETF is up 11.9% in May (read: Winners of Q1 Earnings: 5 Best ETF Charts).
PowerShares S&P SmallCap Consumer Staples Portfolio (PSCC - Free Report)
The consumer staples gained on the dual benefits of strong earnings and investors’ flight to defensive sector, which generally outperforms during periods of low growth and high uncertainty. In particular, Q1 earnings for the 73.8% of the small-cap consumer staples sector market capitalization are up 54.9% on higher 10% revenue growth.
PSCC, which targets the small-cap segment of the sector, has gained 11% in May. The fund follows the S&P SmallCap 600 Capped Consumer Staples Index, holding 20 stocks in its basket with a tilt toward the top firm at 12.71%. Other firms hold no more than 8.65% of assets. From an industrial look, food products take the chunk 45.1% share, followed by household products (15.4%), personal products (14%) and food and staples retailing (12.7%). The ETF has managed assets worth $45 million and trades in average daily volume of 4,000 shares. It charges 29 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook (read: Solid Small-Cap Earnings Put Spotlight on These Sector ETFs).
PowerShares S&P SmallCap Energy Fund (PSCE - Free Report)
The oil price rally has brought back the allure for energy ETFs. As such, PSCE, which provides exposure to the U.S. small-cap segment of the energy sector by tracking the S&P Small Cap 600 Capped Energy Index, has gained 9.2% in May. Holding 31 securities in its basket, it is highly concentrated on the top firm with 12.2% exposure while other firms hold less than 9% of total assets. The fund is less popular with AUM of $76.3 million and average daily volume of 62,000 shares. It charges 29 bps in fees per year and has a Zacks ETF Rank #3 with a High risk outlook (read: Tap Oil with Best Energy ETFs & Stocks YTD).
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