Markets

5 Growth ETFs & Stocks to Ride the Market Rally

The stock market has been on a tear though concerns over resurging coronavirus and U.S. China tensions have kept returns on check. Though the rally has been broad-based, the tech-heavy Nasdaq Composite Index is firing all cylinders, hitting new all-time highs.

Growth investing has taken the lead over value and is likely to stay this way given a slew of reasons. A superb rally in the mega-cap tech stocks, trillions of dollars in monetary and fiscal stimulus, and the positive developments in potential coronavirus vaccines were the biggest catalysts. Notably, biotech and pharma firms like Moderna MRNA, Pfizer PFE, Inovio Pharmaceuticals INO, Johnson & Johnson JNJ, Merck MRK and Eli Lilly LLY have been leading in the vaccine race (read: Late-Stage Coronavirus Vaccine Trials Begin: Biotech ETFs to Gain).

A latest industry gauge indicates that U.S. manufacturing activity expanded in July at the fastest pace in more than a year. This coupled with a raft of stronger-than-expected manufacturing purchasing managers indexes in Europe and in China, which signals a steady global economy, also lifted investors’ sentiment. Apart from these, the rise in mergers and acquisitions also led to a spike in the stock market.

Why Growth?

Growth stocks refer to high-quality stocks that are likely to witness revenues and earnings increasing 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. Growth stocks tend to outperform during an uptrend.

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.

That said, we have highlighted the five best ETFs & stocks from this corner of the market that have outperformed so far this year. These funds have a solid Zacks ETF Rank #1 (Strong Buy), or 2 (Buy), indicating their outperformance in the coming months if the same trend prevails.

Best ETFs

Vanguard Mega Cap Growth ETF MGK

This ETF offers diversified exposure to the largest growth stocks in the U.S. market by tracking the CRSP US Mega Cap Growth Index (read: 4 ETF Zones Making the Most of a Weakening Dollar).

Zacks ETF Rank: #1
AUM: $8.7 billion
Expense Ratio: 0.07%
YTD Returns: 22.7%

iShares Morningstar Large-Cap Growth ETF JKE

This fund targets large U.S. companies that are expected to see earnings growth at an above-average rate relative to the market. It follows the Morningstar Large Growth Index.

Zacks ETF Rank: #1
AUM: $1.8 billion
Expense Ratio: 0.25%
YTD Returns: 21.6%

iShares Morningstar Mid-Cap Growth ETF JKH

This ETF targets the mid-cap growth stocks and tracks the Morningstar Mid Growth Index.

Zacks ETF Rank: #2
AUM: $945.2 million
Expense Ratio: 0.30%
YTD Returns: 21.5%

Vanguard Growth ETF VUG

This product tracks the performance of the CRSP US Large Cap Growth Index.

Zacks ETF Rank: #1
AUM: $59.7 billion
Expense Ratio: 0.04%
YTD Returns: 21.2%

iShares Russell Top 200 Growth ETF IWY

This fund follows the Russell Top 200 Growth Index.

Zacks ETF Rank: #1
AUM: $2.9 billion
Expense Ratio: 0.20%
YTD Returns: 21.1%

Best Stocks

Nautilus Group Inc. The NLS

It is an iconic industry leader with a rich history and reputation for building the best cardio and strength equipment for home use. You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks Rank: #1
Growth Score: A
Market Cap: $311 million
This Year Estimated Earnings Growth: 108.82%
YTD Returns: 572%

Veritone Inc. VERI

This artificial intelligence company developed the Veritone Platform, which unlocks the power of AI-based cognitive computing to transform and analyze unstructured public and private audio and video data for clients in the media, politics, legal and law enforcement industries (read: More Run for Tech ETFs After Sizzling Earnings?).

Zacks Rank: #2
Growth Score: A
Market Cap: $306.8 million
This Year Estimated Earnings Growth: 47.6%
YTD Returns: 400.8%

Quidel Corporation QDEL

This company discovers, develops, manufactures and markets point-of-care, rapid diagnostic tests for detection of medical conditions and illnesses.

Zacks Rank: #1
Growth Score: B
Market Cap: $11.9 billion
This Year Estimated Earnings Growth: 171%
YTD Returns: 276.5%

DocuSign Inc. DOCU

This company provides e-signature solutions offering services to mortgage, non-profit, government, real estate, insurance, technology and healthcare industries.

Zacks Rank: #2
Growth Score: A
Market Cap: $39.8 billion
This Year Estimated Earnings Growth: 48.4%
YTD Returns: 205.3%

Shopify Inc. SHOP

This company provides a multi-tenant, cloud-based, multi-channel commerce platform for small and medium-sized businesses.

Zacks Rank: #2
Growth Score: A
Market Cap: $120.1 billion
This Year Estimated Earnings Growth: 120%
YTD Returns: 157.6%

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Johnson Johnson (JNJ): Free Stock Analysis Report

Pfizer Inc. (PFE): Free Stock Analysis Report

Merck Co., Inc. (MRK): Free Stock Analysis Report

Moderna, Inc. (MRNA): Free Stock Analysis Report

Eli Lilly and Company (LLY): Free Stock Analysis Report

Quidel Corporation (QDEL): Free Stock Analysis Report

Nautilus Group, Inc. The (NLS): Free Stock Analysis Report

Inovio Pharmaceuticals, Inc. (INO): Free Stock Analysis Report

Shopify Inc. (SHOP): Free Stock Analysis Report

Vanguard Growth ETF (VUG): ETF Research Reports

iShares Morningstar LargeCap Growth ETF (JKE): ETF Research Reports

Vanguard Mega Cap Growth ETF (MGK): ETF Research Reports

iShares Russell Top 200 Growth ETF (IWY): ETF Research Reports

Veritone, Inc. (VERI): Free Stock Analysis Report

iShares Morningstar MidCap Growth ETF (JKH): ETF Research Reports

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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