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Top Sectors of 1H & Their Top Stocks

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As we are almost near the halfway mark to the year, a flashback of these six months sounds like a good idea. The first quarter of 2019 was all about a patient Fed, cues of development in the U.S.-China trade relation, the longest government shutdown in the United States and a rally in marijuana and oil investments.

However, the second quarter was fraught with resurfacing trade tensions, slight slump in oil prices and flaring geopolitical tensions in the Middle East. Overall, the Wall Street has been upbeat in the first half. SPDR S&P 500 ETF (SPY - Free Report) was up 18.6% in the past six months (as of Jun 27, 2019), thanks to rising bets on Fed rate cuts.

Against this backdrop, we highlight top-performing sectors of the first half and some top-performing stocks from each sector. The stocks have room to run as these are top-rated.

Technology

The space has been red hot this year with Technology Select Sector SPDR Fund (XLK - Free Report) returning 28.6% in the past six months. The improvement in U.S.-China trade ties in the first quarter, a dovish Fed throughout the first half, moderate strength in the greenback and emergence of cutting-edge technology have been driving the sector.

Snap Inc. (SNAP - Free Report) – Up 166.7%

The Zacks Rank #2 (Buy) provides technology and social media services. The company's principal product Snapchat is a camera application that helps people communicate through short videos and images. The stock comes from a top-ranked Zacks industry (top 36%).

Consumer Discretionary

Consumer stocks have been at a sweet spot this year. Consumer Discretionary Select Sector SPDR Fund (XLY - Free Report) is up 22.8% in the past six months (as of Jun 27, 2019). Subdued inflation, solid labor market, decent wage gains and low interest rates are allowing consumers to spend on discretionary items. Moreover, from a year-to-date look, stock market did well this year, which resulted in some wealth effect and propelled consumer stocks.

Roku Inc. (ROKU - Free Report) – Up 201.2%

The Zacks Rank #1 (Strong Buy) Roku is involved in creating streaming platform for delivering entertainment to the television. It belongs to a top-ranked Zacks industry (top 40%).

Industrials

Notably, Industrial Select Sector SPDR Fund (XLI - Free Report) has added 22.5% in the six-month period despite on-off U.S.-China trade tensions. An industrial boom is likely in the U.S. economy due to the narrowing wage differential between developed and emerging economies, moderate strengthening of the U.S. dollar against a basket of emerging currencies and President Trump’s efforts for bringing back manufacturing jobs to America.

CIRCOR International Inc. (CIR - Free Report) – Up 113.9%

The Zacks Rank #1 company designs, manufactures and markets flow control solutions and other highly engineered products and sub-systems for markets, including oil & gas, aerospace, power, process and industrial solutions. It belongs to a top-ranked Zacks industry (top 19%).   

Real Estate

Backdrop of the past six months was perfect for real estate outperformance. Given concerns over U.S.-Sino trade tensions, heightened global growth worries and a clash between the Democrats and Republicans over the Mexico border wall funding, investors’ need for a safe product is understandable from the start of the year. Then there was heightened geopolitical crisis related to Iran, all of which brought down treasury yields and led to a safe-haven rally. This bodes well for real estate stocks as this group performs well in a low-rate environment. These produce high yields and are good pick when the economy is at a decent shape.

Innovative Industrial Properties Inc. (IIPR - Free Report) – Up 117.9%

The Zacks Rank #2 company is a real estate investment trust. It focuses on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for medical-use cannabis facilities. It hails from a top-ranked Zacks industry (top 32%).

Materials

The materials sector, susceptible to global economic growth expectations, has also come up with a stellar performance. Low rates seem to be the key driver while some positive phases in the US-China trade relation helped boost the sector. This is because China is a major consumer of materials. Materials Select Sector SPDR Fund (XLB - Free Report) has advanced 18.5% this year.

Flexible Solutions International Inc. (FSI - Free Report) – Up 204.4%

The Zacks Rank #1 company is an environmental technology company focusing on the research, development and manufacturing of products that save water and energy. It comes from a top-ranked Zacks industry (top 40%).    

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