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5 Best Sector ETFs of October With Double-Digit Returns

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October has been kind to the U.S. stock market thanks to U.S.-China trade progress, better-than-expected corporate earnings and a third Fed rate cut.

U.S. President Trump said that negotiations for the so-called phase one of the trade deal with China were “ahead of schedule.” The Office of the U.S. Trade Representative said that Washington will consider extending certain tariff exclusions on $34 billion worth of imports from China. In fact, the combination of factors pushed the S&P 500 to new all-time highs lately.

That said, a few sector ETFs have outperformed the market. Below we have highlighted five such ETFs that have raked in substantial gains in October and could be better plays if the trend prevails.

Invesco Shipping ETF SEA – Up 13.9%

The shipping ETF has emerged as the winner in October buoyed by a record-high tanker rates amid a spike in geopolitical uncertainty. Notably, the U.S. sanctions on two units of a Chinese shipping company in September, which put part of its fleet of oil carriers off-limits to traders, led to the rally. This ETF follows the Dow Jones Global Shipping Index, which measures the performance of high dividend-paying companies in the global shipping industry. It is home to 25 stocks with heavy concentration on the top firm. The fund has AUM of $48.3 million and charges 66 bps in annual fees. It trades in average daily volume of 28,000 shares.

ALPS Medical Breakthroughs ETF SBIO – Up 12.4%

Biotech ETFs surged on a string of positive news flow, including trial results and deal activities. Most notably, Biogen (BIIB) has spread optimism into the sector following its Alzheimer treatment report. Better-than-expected corporate earnings added to the strength. While most biotech ETFs have gained, SBIO led the way higher. This fund provides exposure to companies with one or more drugs in Phase II or Phase III FDA clinical trials by tracking S-Network Medical Breakthroughs Index. It holds 78 securities in its basket with none accounting for more than 5.1% share. The product charges 50 basis points in fees per year from investors and trades in a moderate average daily volume of about 34,000 shares. It has AUM of $172.1 million in its asset base and has a Zacks ETF Rank #3 with a High risk outlook (read: Healthcare ETFs Win in October: Here's Why).

iShares Global Timber & Forestry ETF WOOD – Up 11.7%

The timber segment seems to be a key beneficiary of housing market recovery, as timber and related products are required for new houses. WOOD offers global exposure to companies that produce forest products, agricultural products, and paper and packaging products by tracking the S&P Global Timber & Forestry Index. It holds 25 stocks in its basket with each accounting for less than 8% of assets. The ETF has amassed $238.9 million in its asset base and trades in average daily volume of more than 20,000 shares (read: Top and Flop ETFs of October).

VanEck Vectors Oil Refiners ETF (CRAK - Free Report) – Up 10.9%

The oil refining segment of the broad energy space is shining as the players in this industry use oil as an input for processing refined petroleum products like gasoline. Hence, lower oil prices are boosting margins for refiners, leading to healthy stock prices. This trend is likely to continue if crude prices (input costs) remain lower or continue to fall further, leading to higher spreads. Spread is the difference in price between a barrel of oil and a barrel of refined product like gasoline, diesel, or jet fuel. As a result, the higher the spread, the more the profits will be for oil refiners (read: Time for Undervalued Sector ETFs as Stocks Hit All-Time High?).

With AUM of $28.9 million, CRAK is a one-stop shop for investors to play the oil refining market. It follows the MVIS Global Oil Refiners Index, holding 25 stocks with each making up for less than 8.6% of assets. The product charges 60 bps in annual fees and trades in volume of 9,000 shares a day on average.

First Trust Nasdaq Semiconductor ETF FTXL — Up 10.6%

The trade deal optimism has led to surge in the semiconductor corner of the broad technology sector given its significant exposure to China. FTXL offers exposure to the 30 most-liquid U.S. semiconductor securities based on volatility, value and growth by tracking the Nasdaq US Smart Semiconductor Index. It has accumulated $33.5 million in AUM and trades in average daily volume of 16,000 shares. It charges 0.60% in expense ratio and has a Zacks ETF Rank #3 (read: Time to Buy the Dip in Semiconductor ETFs?).

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