U.S. equity markets have been on a stellar run since the election hitting all-time highs on several occasions. While the rally cooled down on concerns over Trump's protectionist action and lack of clarity on policy reforms, his promises of tax cuts and infrastructure spending reignited risk-on trade and bolstered enough confidence in the market in the last five trading sessions.
In fact, the Wall Street made record closings for the fifth consecutive session, marking the longest record-setting streak for all three benchmarks since 1992. Further, the two-year strongest Q4 earnings growth, slew of upbeat economic data, stabilizing oil price and the prospect of higher interest rates added to the strength. Particularly, the Fed in its latest testimony hinted at a March rate hike (read: Yellen Gives Hawkish Signals: 5 ETF Plays ).
Moreover, the U.S. economy is clearly on a solid footing buoyed by an impressive labor market, rising wages, slowly rising inflation, increasing consumer spending and record level of consumer confidence. The bullish trend is likely to continue in the coming days with the President's much-anticipated plan for tax cuts in a few weeks.
While every corner of the market is enjoying the ascent, high beta stocks and ETFs are outperforming.
Why?
Beta measures the price volatility of the stocks or funds relative to the overall market. It has direct relationship to market movements. A beta of more than 1 indicates that the price tends to move higher than the broader market and is extremely volatile while a beta of less than 1 indicates that the price of the stock or fund is less volatile than the market.
That said, high beta stocks seek to capitalize on continued growth with market beating returns. This is because when markets soar, high beta stocks experience larger gains than the broader market counterparts and thus, outpace their rivals. However, these exhibit a higher level of volatility (read: Trump Tax Talk Boosts Market: Time for Momentum ETFs? ).
Given the bullishness on the economy and earnings, investors could find the following ETFs and stocks intriguing options in the bullish market:
ETF Picks
Here, we have chosen ETFs that are not confined to a specific sector or industry but offers exposure to the broad stock market. Additionally, these have AUM of at least $50 million to ensure better tradability and liquidity.
Guggenheim S&P SmallCap 600 Pure Value ETF RZV
This fund provides pure exposure to the small cap value segment of the U.S. equity market by tracking the S&P SmallCap 600 Pure Value Index (read: 4 Under-the-Radar ETFs Soaring High After Trump Win ).
Zacks Rank: #3 (Hold)
Beta: 1.40
AUM: $284.7 million
Expense Ratio: 0.35%
5-Day Performance: 3.94%
Oppenheimer Small Cap Revenue ETF RWJ
This product offers exposure to securities of the S&P SmallCap 600 but is weighted by revenues instead of market capitalization.
Zacks Rank: #3
Beta: 1.29
AUM: $443.2 million
Expense Ratio: 0.39%
5-Day Performance: 3.87%
PowerShares S&P 500 High Beta Portfolio SPHB
This fund tracks the performance of 98 stocks from the S&P 500 Index with the highest realized volatility over the past 12 months.
Zacks Rank: N/A
Beta: 1.46
AUM: $570.3 million
Expense Ratio: 0.25%
5-Day Performance: 3.70%
Guggenheim S&P 500 Pure Value ETF RPV
This product tracks the S&P 500 Pure Value Index and provides exposure to the pure value stocks in the large-cap segment (read: Large-Cap Value ETFs Capitalizing on Renewed Trump Trade ).
Zacks Rank: #2 (Buy)
Beta: 1.24
AUM: $886.3 million
Expense Ratio: 0.35%
5-Day Performance: 3.64%
Vanguard Russell 2000 Growth Index ETF VTWG
This fund offers exposure to the growth segment of the U.S. small cap market by tracking the Russell 2000 Growth Index.
Zacks Rank: #2 (Buy)
Beta: 1.24
AUM: $180.6 million
Expense Ratio: 0.20%
5-Day Performance: 3.34%
Stocks Picks
For stocks, we have chosen those that have a top Zacks Rank #1 (Strong Buy) or 2 and a VGM Style Score of B or better along with high beta.
Hudbay Minerals Inc. HBM
This mining company is engaged in discovery, production and marketing of base metals in North and Central America.
Zacks Rank: #1
VGM Style Score: A
Beta: 3.25
Market Cap: $2.15 billion
5-Day Performance: 11.73%
United States Steel Corporation X
This steel producer manufactures and sells a variety of steel mill products, coke and taconite pellets in North America and Europe.
Zacks Rank: #2
VGM Style Score: A
Beta: 2.76
Market Cap: $6.77 billion
5-Day Performance: 16.21%
American Equity Investment Life Holding Company AEL
This life insurance company, through its subsidiaries, develops and sells fixed index and fixed rate annuity products in the United States (read: Insurance ETFs Leading Financial Sector in Q4 Earnings ).
Zacks Rank: #1
VGM Style Score: B
Beta: 2.36
Market Cap: $2.39 billion
5-Day Performance: 12.82%
Insight Enterprises Inc. NSIT
This company provides information technology (IT) hardware, software, cloud, and service solutions for business, government, healthcare, and educational clients in the United States, Canada, Europe, the Middle East, Africa, and the Asia-Pacific.
Zacks Rank: #1
VGM Style Score: A
Beta: 1.91
Market Cap: $1.62 billion
5-Day Performance: 21.88%
Sierra Wireless Inc. SWIR
This company is a leading provider of wireless data communications products engaged in building the Internet of Things (IoT) in North America, Europe, and the Asia Pacific (read: Technology ETFs Hitting All-Time High ).
Zacks Rank: #1
VGM Style Score: A
Beta: 1.90
Market Cap: $804.47 million
5-Day Performance: 37.98%
Bottom Line
Given the bullish trends, high beta products will continue to generate outsized returns in the coming weeks and is suitable for risk tolerance investors given its volatile nature.
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Sierra Wireless, Inc. (SWIR): Free Stock Analysis Report
American Equity Investment Life Holding Company (AEL): Free Stock Analysis Report
HudBay Minerals Inc (HBM): Free Stock Analysis Report
Insight Enterprises, Inc. (NSIT): Free Stock Analysis Report
United States Steel Corporation (X): Free Stock Analysis Report
OPP-SC REVENU (RWJ): ETF Research Reports
POWERSH-SP5 HBP (SPHB): ETF Research Reports
GUGG-SP 600 PV (RZV): ETF Research Reports
GUGG-SP 500 PV (RPV): ETF Research Reports
VANGD-RUS 2000G (VTWG): 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
