After reaching a peak at the end of April on better-than-expected earnings, U.S. stocks faltered on worsening trade spat between the United States and China. Additionally, growing fears of Brexit without a deal and bouts of weak economic data added to the woes. The combination of the factors is paving the way for the worst May in seven years.
Coming to the latest earnings reporting cycle, it was better than expected. This is because Q1 earnings for 96% of the S&P 500 Index market capitalization increased 0.1% on 4.8% revenue growth, with 76.7% beating EPS estimates and 59.6% surpassing top-line expectations, according to the latest Earnings Trends. While Q1 earnings and revenue growth is tracking below the same group of S&P 500 members in the recent past, companies beating EPS estimates were roughly the same as in other recent periods (read: Play Strong Earnings Beat With These Top-Ranked Sector ETFs).
While renewed trade fears and better earnings led to mixed trading, a few corners of the equity ETF world are still rallying. Below, we have highlighted five ETFs that buoyed on the combination of both factors. In addition, we have given a chart for their performances since the start of the year and compared them with the broader market fund SPY and the broader sector.
Invesco KBW Property & Casualty Insurance ETF KBWP
This fund offers exposure to companies primarily engaged in U.S. property and casualty insurance activities. It has gained 5.5% on earnings optimism and the improving economy backed by a solid job market, growing wages and rising consumer confidence that is leading to higher demand for all types of insurance services. It has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
Virtus Reaves Utilities ETF UTES
This fund seeks to provide total return through a combination of capital appreciation and income, primarily through investments in equity securities of companies in the utility sector. It has gained 3.3% over the past month on investors’ flight to defensive investment. Being a low-beta sector, it is relatively protected from large swings (ups and downs) in the stock market and is thus considered safe haven amid economic or political turmoil. Though the sector registered decline in revenues of 0.2% this earnings season, its earnings grew a decent 4.4% and supported the rally in UTES.
First Trust North American Energy Infrastructure Fund EMLP
MLPs became immensely popular in the earnings season with investors searching for consistent income amid volatile market and weak earnings. These represent an attractive investment option for income-focused investors as these pay out substantially all of their income to investors on a regular basis. MLPs have relatively consistent and predictable cash flows, making them safer and less risky than other plays in the broader energy space. In addition to high yields and the potential for capital appreciation, MLPs also have lower volatility and provide diversification benefits to the portfolio. EMLP was up 1.5% in a month. This ETF is an actively managed fund designed to provide exposure to the securities headquartered or incorporated in the United States and Canada and engaged in the energy infrastructure sector (read: Markets Jump as Fears Ease: 4 Sector ETFs at New Highs).
iShares U.S. Healthcare Providers ETF IHF
This fund offers exposure to U.S. companies that provide health insurance, diagnostics, and specialized treatment. Total earnings for 95.8% of the total healthcare market capitalization are up 7.8% on revenue growth of 6.5%, with 86.5% beating EPS and 69.2% beating revenue estimates. IHF is up 1.5% in a month and has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.
SPDR S&P Aerospace & Defense ETF XAR
This ETF offers equal-weight exposure to aerospace & defense stocks and has risen 1% on a combination of escalation in trade dispute and earnings. Notably, total earnings from 100% of the sector’s total market capitalization are up 6.9% on 10.1% higher revenues, with 90% of the companies beating on earnings and 80% exceeding top-line estimates. Earnings beat ratio is the highest when compared to the other sectors. The fund has a Zacks ETF Rank #2 with a Medium risk outlook (read: Aerospace and Defense ETFs Rally on Strong Q1 Earnings).
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Virtus Reaves Utilities ETF (UTES): ETF Research Reports
Invesco KBW Property & Casualty Insurance ETF (KBWP): ETF Research Reports
iShares U.S. Healthcare Providers ETF (IHF): ETF Research Reports
SPDR S&P Aerospace & Defense ETF (XAR): ETF Research Reports
SPDR S&P 500 ETF (SPY): ETF Research Reports
First Trust North American Energy Infrastructure Fund (EMLP): 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.