The coronavirus outbreak is turning into a pandemic. This has led to risk off sentiments resulting in a broad market sell-off. The Dow Jones recorded its largest two-day decline of 6.6% since Feb 5, 2018 and the S&P 500 Index saw its largest two-day fall of 6.3% since Aug 24, 2015. The Nasdaq Composite registered its biggest two-day decline of 6.4% since Jun 27, 2016.
The number of virus cases is continuing to rise worldwide. According to the World Health Organization, there are now 80,238 cases in 34 countries and at least 2,700 related deaths. South Korea raised its coronavirus alert to the “highest level,” with total cases increasing to more than 800. Italy has been the worst affected country outside of Asia, with more than 130 reported cases and seven deaths. Iran confirmed 12 deaths and 61 coronavirus cases in the country (read: ETFs to Invest in as Coronavirus Fears Accelerate).
Market sentiments got worse after the Centers for Disease Control and Prevention warned that the outbreak “might be bad,” and that Americans should prepare for the possibility of disruptions, even though the current threat to the United States remains low.
The wave of selling has pushed the three major indices into red for the year. With the monster two-day decline, 64% of stocks in the S&P 500 are in correction levels, meaning that these are down at least 10% from their recent 52-week highs while 25% are at bear levels or at least 20% below their 52-week highs. Overall, the index has shed an estimated $1.737 trillion in value in two days, according to S&P Dow Jones Indices’ Senior Index Analyst Howard Silverblatt.
However, the coronavirus-triggered selloff has created a buying opportunity for long-term investors. The market is speculating that the central banks across the globe would step in to counter any economic weakness resulting from the virus. As such, investors should take advantage of the beaten down prices. For them, we have highlighted seven solid ETF picks that were in red this week but have a solid upside potential. All these have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
SPDR S&P Aerospace & Defense ETF (XAR - Free Report) – Down 8.6%
XAR offers equal-weight exposure to 32 companies in the aerospace & defense segment. It follows the S&P Aerospace & Defense Select Industry Index, charging 35 basis points (bps) in annual fees from investors. The fund has been able to manage $2.2 billion in its asset base and has a Zacks ETF Rank #2 (read: Aerospace and Defense ETFs Gain Despite Mixed Q4 Earnings).
Invesco Dynamic Semiconductors ETF (PSI - Free Report) – Down 8.2%
This fund targets the semiconductor corner of the broad technology segment and follows the Dynamic Semiconductor Intellidex Index. With AUM of $246 million, it holds 30 securities in its basket and charges 58 bps in fees per year from investors. The product has a Zacks ETF Rank #1.
First Trust NASDAQ Clean Edge Green Energy Index Fund (QCLN - Free Report) – Down 7.6%
This fund tracks the Nasdaq Clean Edge Green Energy Index, which measures the performance of clean energy companies publicly traded in the United States and includes companies engaged in manufacturing, development, distribution & installation of emerging clean-energy technologies including, but not limited to, solar photovoltaics, biofuels and advanced batteries. It manages assets worth $234.6 million and charges 60 bps in fees per year. In total, the product holds 43 securities and has a Zacks ETF Rank #2 (read: 6 Hot Top-Ranked ETFs of 2020).
SPDR S&P Internet ETF (XWEB - Free Report) – Down 7.6%
This product targets the Internet corner of the broad tech space and follows the S&P Internet Select Industry Index. It charges 35 bps in annual fees. With AUM of $16.4 million, the fund holds 42 stocks in its basket and carries a Zacks ETF Rank #2.
Invesco S&P 500 GARP ETF SPGP – Down 7.6%
This ETF offers exposure to 75 companies having the highest “growth scores” and “quality and value composite scores” by tracking the S&P 500 Growth at a Reasonable Price Index. It has amassed $444.8 million and charges 35 bps in fees per year from investors. The fund sports a Zacks ETF Rank #1.
Technology Select Sector SPDR Fund (XLK - Free Report) – Down 7.2%
This ETF targets the broad technology sector by tracking the Technology Select Sector Index. It holds 71 stocks in its basket and charges 13 bps in annual fees. XLK is the most popular technology ETF with AUM of $27.3 billion and has a Zacks ETF Rank #1 (read: Coronavirus to Hurt Apple Earnings: Time to Buy These ETFs?).
Motley Fool 100 Index ETF (TMFC - Free Report) – Down 6.7%
This fund tracks the Fool 100 Index, which is a market-cap weighted index that measures the performance of the 100 largest active buy recommendations from The Motley Fool. It holds 102 securities in its basket and charges 50 bps in annual fees. The product has AUM of $233.4 million and has a Zacks ETF Rank #2.
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