With the fiscal cliff averted, investors have gained
confidence in the market and are more open to risky investments.
U.S. stocks started the year on a strong note, while improving
job and housing data resulted in stocks further gaining strength.
In fact many equity
experienced heavy inflows to start fiscal 2013 (
Best and Worst ETFs to Start the Year
Indeed, the S&P 500 rallied to a five-year high led by
strong gains in a number of sectors. Last week the S&P 500
was up 8.31 points breaking the resistance level at 1,474 only to
close at 1,480.94, its highest finish since December 26,
The strong momentum of the S&P 500 since the start of the
year indicates that the bull may be back in the market. A number
of market sectors have performed remarkably well in the
year-to-date period, thanks to the market optimism.
In fact many of the nine main sectors of the S&P 500 have
posted remarkable growth to date, suggesting that the positive
sentiment is pretty widespread throughout the equity world.
With the overall bullish tone in the marketplace into the new
year and strength in a number of segments, below, we highlight
five S&P 500 industry ETFs which not only have managed to
stay well in the green, but also provided a return above 4%
Healthcare Select Sector SPDR (
The U.S. healthcare sector is one of the potential bright
spots as the country is one of the major markets for healthcare
and one of the largest spenders on public health, putting the
sector in an advantageous position (
Four ETFs for Obama's second term
The sector had been in focus despite profitability remaining
under pressure for many companies, and some policy uncertainty
with regards to the Affordable Care Act.
In 2013, the sector is expected to remain in growth territory
attributable to the aging population and higher rates of chronic
disease, growing demand in emerging markets and new product
Furthermore, the increase in the market size combined with
rapid inorganic growth for many companies in the form of mergers
and acquisitions will help to form a cordial coalition that would
seek to make up for the decrease in revenue in the recent past,
and address the issue for patent expiry for many of their key
In such a scenario, XLV can be an interesting option to play
the U.S. healthcare sector. The sector has performed relatively
well year to date delivering a return of 9.62%. In fact, XLV
ended the year at a gain of 17.5%.
XLV boasts an impressive $5.6 billion in assets under
management and distributes this asset base among 55 holdings.
However, the allocation entails heavy concentration in the top
ten holdings with a share of 57.15%.
Its top holdings include well-known bellwethers like Johnson
& Johnson, Pfizer and Merck. In fact the top three holdings
get one third of the asset allocation thereby playing a dominant
role in the performance of the ETF.
The ETF represents a varied group of stocks that belong to
pharmaceutical (48.19%), providers (19%), healthcare equipment
and supplies (17.64%), healthcare providers & services
(16.12%) and biotechnology (13.52%). The fund charges a fee of 18
SPDR S&P Retail ETF (
The retail industry is sure to benefit from an improving
economy, an increase in consumer spending and better income
levels as a function of higher employment (
3 Overlooked Ways to Target Consumers with
). Further, a recovery in the auto and housing market should
positively impact the U.S. retail industry.
This is well evidenced by the December sales number which
registered growth of 4.7% year over year. This is a far better
showing from the summer low of 3.5% but still a long way to go
from the level of 9.2% achieved 18 months back. The recovery in
sales is yet to match earlier highs.
Investors can capitalize on the improving sales trend through
a basket of securities. In this context XRT appears to be
one of the popular ways to play the trends in the industry.
XRT is one of the top performing ETFs in the retail sector
beating all its peers in 2012. And it continues with its
outstanding performance this year too delivering a return of
5.01% to date.
In fact, the ETF experienced a surge in heavy volume last week
attributable to strong retail sales in December. The fund is now
trading near its all time high.
XRT through an asset base of $922.03 million manages total
holdings of 98 securities.The fund offers diversification as
indicated by its holdings of nearly 12% in the top ten list. Rite
Aid Corp, Office Depot and Supervalu represent the top three
choices in the list. The ETF charges a fee of 18 basis points on
an annual basis.
Financial Select Sector SPDR (
Financial sector ETFs were one of the best performing sectors
in 2012. The sentiment for the sector has also remained bullish
of late. The recent rally in the equity market was mostly
attributable to the performance of financial stocks. The growth
momentum is likely to sustain in 2013 (
Financial ETFs Set to Rally in Earnings
XLF is one of the popular ETFs tracking the financial sector
and has been in the limelight attributable to its remarkable
performance. The ETF is continuously trying to break out from its
The fund has performed exceptionally well in the last one year
delivering a return of 28.5%. In the year-to-date period, the
fund posted a gain of 4.63%.
The fund manages an asset base of $10.4 billion and trades at
volume levels of more than 56 million shares a day.
XLF is home to 82 financial stocks with JPMorgan Chase,
Berkshire Hathaway and Wells Fargo comprising the top three
holdings with asset allocation of 8.49%, 8.35% and 8.22%,
respectively. The fund charges a fee of 18 basis points.
Energy Select Sector SPDR Fund (
The U.S. Energy sector appears to be another lucrative
opportunity to invest in 2013. It is a sector with strong
fundamentals and low valuations. Also, energy stands to gain from
profits from abroad (
3 Energy ETFs for America's Production Boom
If the market continues with its recent rally, the energy
sector is certain to be a beneficiary. With the boost in oil
production capacity by most drillers, the U.S. will once again
become a leader in energy development.
To play this optimism in the sector, XLE can prove to be a
good investing tool providing access to 45 energy companies with
a heavy reliance on the top ten holdings for performance. The
fund has nearly 65% of its asset base of $7.2 billion in the top
The fund has been a laggard for the most part of fiscal 2012
ending the year with a gain of 5.21%. But since the beginning of
2013, the performance has been remarkably good with year-to-date
returns of 5.69%.
Among individual holdings, the top two companies, Exxon Mobil
and Chevron Corp, take away the major chunk of the asset base
with a total combined allocation of 33.63%. The fund charges a
fee of 18 basis points annually.
Materials Select Sector SPDR Fund (
An ETF riding on the strong fundamentals of the material
sector is XLB. XLB appears to be flirting with the above
resistance levels and is experiencing heavy inflows. In fact the
momentum in the ETF appears to be bullish (
Could This Be The Year For These Mining ETFs?
XLB has been a good performer in 2012 with a return of 14.74%.
The ETF started the year on a strong note thereby posting a gain
of 4.79% in the year-to-date period.
The fund's asset base of $2.8 billion is spread across
holdings of 32 securities. Monsanto is the largest holding in
XLB, accounting for 11.3% of the ETF. Other top holdings include
Du Pont de Nemours Co 9.0%, and Dow Chemical 8.3%.
The fund relies heavily on the chemical sector in which it has
assigned an asset base of 71.2%. Metals & mining also get a
double-digit allocation of 18.1%. XLB charges a fee of 18 basis
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SPDR-MATLS SELS (XLB): ETF Research Reports
SPDR-EGY SELS (XLE): ETF Research Reports
SPDR-FINL SELS (XLF): ETF Research Reports
SPDR-HLTH CR (XLV): ETF Research Reports
SPDR-SP RET ETF (XRT): ETF Research Reports
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