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With Wall Street witnessing a remarkable rally, growth investing seems the most compelling choice at present. This is especially true as growth stocks are momentum plays and tend to outperform in a trending market (a market characterized by a prolonged uptrend). These refer to high-quality stocks that are likely to witness revenue and earnings increase 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.
Solid Market Trends
The strong bull run of 2019 has been carried over into the New Year on U.S.-China trade deal optimism and easing fears in Middle East tensions. In fact, all the three major indices hit new record highs with the Dow Jones near the next milestone of 29,000 (read: S&P 500 Hits New Highs: ETFs Soaring to Start 2020).
Trade negotiations have been major market movers for more than a year. The phase one of the trade deal between the Washington and Beijing is expected to be signed next week. Meanwhile, President Donald Trump’s comments eased fears of an all-out conflict in the Middle East following retaliatory missile strikes on U.S. military compounds in Iraq.
The uptrend is also being powered by the Fed’s accommodative interest-rate policy, and a resilient domestic economy. The central bank is expected to keep interest rates steady after three rate hikes last year. The U.S. economy is on a strong growth path with the unemployment rate hovering around the lowest level since 1969 and the housing market showing signs of a strong recovery.
ETFs to Play
Given the bullishness, investors seeking to capitalize on the strong trends should consider growth ETFs. However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility when compared to value stocks.
Below, we have presented some ETFs that are scaling to all-time highs in the latest trading session. All these funds have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
This product tracks the S&P 900 Growth Index and is home to 504 stocks. It has accumulated $7.9 billion in its asset base and charges 4 bps in annual fees. IUSG has a Zacks ETF Rank #1 with a Medium risk outlook (read: ETF Strategies to Ride the Wall Street Bull Run).
This fund offers exposure to 127 large U.S. companies, whose earnings are expected to grow at an above-average rate relative to the market by tracking the Russell Top 200 Growth Index. It has AUM of $1.8 billion and expense ratio of 0.20%. The ETF has a Zacks ETF Rank #1 with a Medium risk outlook.
This fund tracks the S&P 500 Growth Index and holds 272 stocks in its basket. It charges 18 bps in annual fees and has amassed $25.1 billion in its asset base. The product has a Zacks ETF Rank #2 with a Medium risk outlook.
This fund offers exposure to small-cap companies that have above-average earnings growth expectations relative to the market, by tracking the Russell 2000 Growth Index. With AUM of $9.9 billion, it holds a broad basket of 1,171 securities and charges 24 bps in annual fees. The product has a Zacks ETF Rank #1 with a Medium risk outlook (read: Top-Ranked ETFs & Stocks to Profit From the January Effect).
First Trust Large Cap Growth AlphaDEX Fund (FTC - Free Report)
This fund tracks the NASDAQ AlphaDEX Large Cap Growth Index, holding a basket of 188 stocks with key holdings in information technology. It has $1.0 billion in AUM and charges 61 bps in annual fees. The ETF trades in average daily volume of 65,000 shares and has a Zacks ETF Rank #2 with a Medium risk outlook.
This ETF targets the mid-cap segment of the broad U.S. stock market and follows the CRSP US Mega Cap Growth Index. It holds 115 stocks in its basket. The fund charges 7 bps in annual fees and has AUM of $5.3 billion. It has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 Winning ETF Strategies for 2020).
This fund offers exposure to S&P 500 companies that display the strongest growth characteristics based on sales growth, earnings change to price ratio and momentum. It holds 272 stocks in its basket and charges 4 bps in annual fees. The ETF has amassed $5.9 billion in its asset base and has a Zacks ETF Rank #1 with a Medium risk outlook.
Invesco Dynamic Large Cap Growth ETF (PWB - Free Report)
This ETF follows the Dynamic Large Cap Growth Intellidex Index, holding 50 stocks in its basket. It has AUM of $737.5 million and charges 55 bps in annual fees. The product has a Zacks ETF Rank #2 with a Medium risk outlook.
With AUM of $3.4 million, this ETF tracks the Russell 1000 Growth Index, charging investors 8 bps in annual fees. It holds a basket of 531 stocks and has a Zacks ETF Rank #1 with a Medium risk outlook (read: Top Performing ETFs of the Decade).
With AUM of $47.5 billion, this fund follows the CRSP US Large Cap Growth Index. It holds 280 stocks in its basket and charges 4 bps in annual fees. VUG has a Zacks ETF Rank #1 with a Medium risk outlook.
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Why You Should Buy Growth ETFs Now
With Wall Street witnessing a remarkable rally, growth investing seems the most compelling choice at present. This is especially true as growth stocks are momentum plays and tend to outperform in a trending market (a market characterized by a prolonged uptrend). These refer to high-quality stocks that are likely to witness revenue and earnings increase 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.
Solid Market Trends
The strong bull run of 2019 has been carried over into the New Year on U.S.-China trade deal optimism and easing fears in Middle East tensions. In fact, all the three major indices hit new record highs with the Dow Jones near the next milestone of 29,000 (read: S&P 500 Hits New Highs: ETFs Soaring to Start 2020).
Trade negotiations have been major market movers for more than a year. The phase one of the trade deal between the Washington and Beijing is expected to be signed next week. Meanwhile, President Donald Trump’s comments eased fears of an all-out conflict in the Middle East following retaliatory missile strikes on U.S. military compounds in Iraq.
The uptrend is also being powered by the Fed’s accommodative interest-rate policy, and a resilient domestic economy. The central bank is expected to keep interest rates steady after three rate hikes last year. The U.S. economy is on a strong growth path with the unemployment rate hovering around the lowest level since 1969 and the housing market showing signs of a strong recovery.
ETFs to Play
Given the bullishness, investors seeking to capitalize on the strong trends should consider growth ETFs. However, it is worth noting that these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S and P/E ratios and exhibit a higher degree of volatility when compared to value stocks.
Below, we have presented some ETFs that are scaling to all-time highs in the latest trading session. All these funds have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
iShares Core S&P U.S. Growth ETF (IUSG - Free Report)
This product tracks the S&P 900 Growth Index and is home to 504 stocks. It has accumulated $7.9 billion in its asset base and charges 4 bps in annual fees. IUSG has a Zacks ETF Rank #1 with a Medium risk outlook (read: ETF Strategies to Ride the Wall Street Bull Run).
iShares Russell Top 200 Growth ETF (IWY - Free Report)
This fund offers exposure to 127 large U.S. companies, whose earnings are expected to grow at an above-average rate relative to the market by tracking the Russell Top 200 Growth Index. It has AUM of $1.8 billion and expense ratio of 0.20%. The ETF has a Zacks ETF Rank #1 with a Medium risk outlook.
iShares S&P 500 Growth ETF (IVW - Free Report)
This fund tracks the S&P 500 Growth Index and holds 272 stocks in its basket. It charges 18 bps in annual fees and has amassed $25.1 billion in its asset base. The product has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares Russell 2000 Growth ETF (IWO - Free Report)
This fund offers exposure to small-cap companies that have above-average earnings growth expectations relative to the market, by tracking the Russell 2000 Growth Index. With AUM of $9.9 billion, it holds a broad basket of 1,171 securities and charges 24 bps in annual fees. The product has a Zacks ETF Rank #1 with a Medium risk outlook (read: Top-Ranked ETFs & Stocks to Profit From the January Effect).
First Trust Large Cap Growth AlphaDEX Fund (FTC - Free Report)
This fund tracks the NASDAQ AlphaDEX Large Cap Growth Index, holding a basket of 188 stocks with key holdings in information technology. It has $1.0 billion in AUM and charges 61 bps in annual fees. The ETF trades in average daily volume of 65,000 shares and has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Mega Cap Growth ETF (MGK - Free Report)
This ETF targets the mid-cap segment of the broad U.S. stock market and follows the CRSP US Mega Cap Growth Index. It holds 115 stocks in its basket. The fund charges 7 bps in annual fees and has AUM of $5.3 billion. It has a Zacks ETF Rank #1 with a Medium risk outlook (read: 5 Winning ETF Strategies for 2020).
SPDR Portfolio S&P 500 Growth ETF (SPYG - Free Report)
This fund offers exposure to S&P 500 companies that display the strongest growth characteristics based on sales growth, earnings change to price ratio and momentum. It holds 272 stocks in its basket and charges 4 bps in annual fees. The ETF has amassed $5.9 billion in its asset base and has a Zacks ETF Rank #1 with a Medium risk outlook.
Invesco Dynamic Large Cap Growth ETF (PWB - Free Report)
This ETF follows the Dynamic Large Cap Growth Intellidex Index, holding 50 stocks in its basket. It has AUM of $737.5 million and charges 55 bps in annual fees. The product has a Zacks ETF Rank #2 with a Medium risk outlook.
Vanguard Russell 1000 Growth ETF (VONG - Free Report)
With AUM of $3.4 million, this ETF tracks the Russell 1000 Growth Index, charging investors 8 bps in annual fees. It holds a basket of 531 stocks and has a Zacks ETF Rank #1 with a Medium risk outlook (read: Top Performing ETFs of the Decade).
Vanguard Growth ETF (VUG - Free Report)
With AUM of $47.5 billion, this fund follows the CRSP US Large Cap Growth Index. It holds 280 stocks in its basket and charges 4 bps in annual fees. VUG has a Zacks ETF Rank #1 with a Medium risk outlook.
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>