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5 Sector ETFs That Crushed the Market in January

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Wall Street extended its decade-long bull run to start 2020, pushing the major indices to record highs on the initial trade deal and Q4 earnings optimism. The Dow Jones and the S&P 500 crossed the major threshold of 29,000 and 3,300, respectively.

However, the rally fizzled out last week following the coronavirus outbreak, which originated in China.  The fast-spreading deadly virus has led to fears of a worldwide pandemic that would disrupt international commerce and hurt global growth. This situation has made investors jittery, compelling them to take a flight to safety. As such, U.S. stocks erased most of the gains made earlier in the month (read: 5 ETFs to Protect Your Portfolio From Coronavirus Threat).

That said, a few sector ETFs still performed incredibly, crushing the broader markets. Below we have highlighted five such ETFs that have raked in substantial gains this month and could be better plays if the trend prevails.

WisdomTree Cloud Computing Fund (WCLD - Free Report) – Up 11.1%

As cloud computing now represents a significant source of disruption not only in the technology sector but also in the investment world, WCLD get a boost irrespective of market conditions. This ETF offers exposure to emerging, fast-growing U.S.-listed companies (including ADRs) that are primarily focused on cloud software and services, and follows the BVP Nasdaq Emerging Cloud Index. It holds 48 stocks in its basket with none accounting for more than 3.31% of assets. The product has amassed $19.6 million in its asset base and trades in average daily volume of 11,000 shares. It charges investors 45 bps in fees per year.

iShares U.S. Home Construction ETF (ITB - Free Report) – Up 9.5%

The U.S. homebuilding industry continued its strong momentum heading into the New Year on lower mortgage rates and decelerating home price growth. The Fed’s easy monetary policy stance has pushed mortgage rates down and made refinance cheaper, encouraging people to buy more homes. This fund provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $1.4 billion, it holds a basket of 45 stocks with heavy concentration on the top two firms. The product charges 42 bps in annual fees and trades in heavy volume of around 2.3 million shares a day on average. It has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Homebuilder ETFs Shining in 2020: Will This Continue?).

ALPS Clean Energy ETF (ACES - Free Report) – Up 9.3%

The world is slowly moving toward 100% renewable energy, thereby pushing clean energy ETFs like ACES higher. This fund seeks to track the performance of an index comprising U.S. and Canada-based companies that primarily operate in the clean energy sector. It has amassed $137 million in its asset base and charges 65 bps in fees per year from investors. It trades in a light average daily volume of around 18,000 shares and holds 32 securities in its basket with none making up for more than 9.1% share (read: Best Thematic ETFs for 2020).

MicroSectors FANG+ ETN (FNGS - Free Report) – Up 8.9%

This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly-traded growth stocks of next-generation technology and tech-enabled companies. It holds 10 stocks in its basket in equal proportion. The product has accumulated $35.7 million in its asset base within three months of debut and charges 58 bps in annual fees. It trades in a meager volume of 3,000 shares a day on average (read: ETFs to Soar as Tesla Beats on Q4 Earnings, Shares Spike).

Utilities Select Sector SPDR (XLU - Free Report) – Up 7.2%

The utilities sector is making the most of market uncertainty. Being low-beta in nature, the sector is relatively protected from large swings (ups and downs) in the stock market and is thus considered a defensive investment or safe haven amid economic or political turmoil. Additionally, it offers solid dividend payouts and excellent capital appreciation over the longer term. With AUM of $11.7 billion, XLU provides exposure to a small basket of 28 securities by tracking the Utilities Select Sector Index. Electric utilities takes the top spot in terms of industries at 62.2%, closely followed by multi utilities (31.2%). The product charges 13 bps in annual fees and sees a massive volume of around 16.4 million shares on average. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (read: 4 Sector ETFs Unaffected by Coronavirus Outbreak).

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