What do small-cap, health care and Japanese stocks have in common?
Probably not much, most of the time. But they were among the top-performing exchange traded funds in June.
Small caps were dominant in the U.S. diversified equity category for the month through June 27, though top honors went to a larger-cap name: VanEck Vectors Morningstar Wide Moat ( MOAT ). "The idea of an economic moat refers to how likely a company is to keep competitors at bay for an extended period," Van Eck's ETF Product Manager Brandon Rakszawksi wrote in a recent blog post.
The $1.2 billion fund was up 2.7% on the month for a year-to-date gain of 13.3%, above the S&P 500's 9.1% return as of June 27. Morningstar classifies MOAT, which tracks the Morningstar Wide Moat Focus Index, as a large-cap blend fund.
Health care accounted for the biggest sector weighting at 35% of assets, followed by 23% in consumer cyclical, 14% in financial services and 12% in industrials. Technology was a distant fifth at 8%.
Top holdings include Guidewire Software ( GWRE ), McKesson ( MCK ) and Gilead Sciences ( GILD ). Amazon.com ( AMZN ), Starbucks (SBUX) and Walt Disney (DIS) also made the 51-stock portfolio. MOAT has a 0.49% expense ratio.
Small-cap ETFs making the screen included iShares Russell 2000 Growth (IWO), Schwab U.S. Small-Cap (SCHA) and ProShares Russell 2000 Dividend Growers (SMDV). All three snared monthly gains of at least 2%.
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Over in the sector fund arena, biotechs continued to show strength with SPDR S&P Biotech (XBI) and iShares Nasdaq Biotechnology (IBB) taking the lead. XBI, up 14.3% in June for a 30.8% YTD gain, is out of buy range from a 72.68 flat-base entry. IBB, which added 8.9% for the month for a 17.3% YTD return, is near the top of a buy zone from a 303.84 entry.
Health care related ETFs accounted for half of the top 12 sector funds shown in the accompanying table. Gold miners, solar, clean energy and a REIT made up the rest. The health care and energy names have each racked up double-digit gains north of 12% so far this year.
Moving over to foreign funds, Japan was a recurring theme among top monthly performers, though the region has recently picked up steam. A few emerging-markets funds also made the list. PowerShares S&P Emerging Markets Momentum (EEMO) came in on top with a 3.5% monthly return for a 22.2% YTD gain.
IShares Asia 50 (AIA), which tracks the S&P Asia 50 Index, advanced 3% in June for a 24.9% YTD gain. The index comprises companies from Hong Kong, Korea, Singapore and Taiwan. IShares Currency Hedged MSCI Japan (HEWJ) and Deutsche X-trackers MSCI Japan Hedged Equity (DBJP) climbed 2.9% each in June for respective YTD gains of 6.2% and 6.1%.
"Positives (for Japan) are improving global growth, more shareholder-friendly corporate behavior and earnings upgrades amid a stable yen outlook," BlackRock's Global Chief Investment Strategist Richard Turnill said in a June 26 report. " We see BoJ policy and domestic investor buying as supportive. Risks are yen strength and rising wages."
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