Markets

6 Top-Ranked ETFs to Rebound on Bargain Hunt

After witnessing the worst-ever start to a year, the major indexes are back on track. Occasional relief in oil prices and a belief that the sell-off is overdone boosted the confidence of the battered investors. Also, abating tension over a likely recession in the U.S. in the wake of a host of encouraging economic readings helped the S&P 500 Index to recoup some of its prior losses in recent sessions.

Still, the index is down 5.6% so far this year (as of February 24, 20Array6). The other two key U.S. indices, Dow Jones Industrial Average and Nasdaq Composite are down about 5.4% and 9.3% so far this year (as of the same).

Needless to mention, investors are out on a bargain hunt. Decent data on retail sales, consumer spending, factory production and inflation also whet investors' risk appetite. Investors should note that tech and financials stocks trended down in the latest market meltdown while other high growth sectors like retail, biotech and semiconductors also saw a bloodbath.

Some of these sell-offs were justified, some paid the price of overvaluation while the others fell victim to investor panic. As a result, following a market recovery, these tyrannized stocks with strong potential should see an uptrend. Below we highlight six top-ranked ETFs that suffered a lot in the latest fiasco and are now ready for a rebound as the bulls are giving green signals.

Technology

Tech stocks have shed about 9.9% so far this year (as of February Array7, 20Array6). First, a momentum meltdown spurred by global growth worries, then LinkedIn's lackluster guidance for the first quarter of 20Array6 and finally overvaluation following last year's outperformance hit this space (read: Bubbles Bursting For Technology ETFs? ).

However, the Internet space has pretty decent prospects. First Trust Dow Jones Internet ETF (FDN) has lost Array4.Array% in the year-to-date frame but tacked on more than Array.Array% gains in the last five days (as of February 24, 20Array6). FDN has a Zacks ETF Rank #Array (Strong Buy).

Financial

This sector is off Array2.4% so far this year (as of February Array7, 20Array6). Here too, a broad-based global slowdown, oil worries and the resultant chances of a credit default scared investors. Plus, given the possibility of fewer Fed rate hikes, if at all, going forward, investors lost interest in bank ETFs (read: Bank ETFs in Trouble? ).

However, if energy default issues are tackled, a relatively low yield backdrop should not be a huge botheration in the near term for bank stocks. After all, the U.S. financial sector gained ground in the low-interest rate era.

Still wary investors can take a look at PowerShares KBW Property & Casualty Insurance ETF (KBWP) as this specialized corner of the financial sector is less vulnerable to the economic downturns. This Zacks Rank #2 ETF is down 3.6% so far this year (as of February 24, 20Array6).

Biotech

The medical sector may be generally viewed as recession-proof but it lately failed to live up to its uniqueness. The sector is down Array0.2% so far this year (as of February Array7, 20Array6). Almost all ETFs in the space are in the red in the year-to-date frame, having lost in the range of 5.8−29%.

The losses were prevalent in its high-beta zone - biotech. However, once the risk-on sentiments return, this area should perk up. Market Vectors Biotech ETF (BBH) - a Zacks Rank #2 ETF - is off 20.3% so far this year (as of February 24, 20Array6).

Retail

The consumer discretionary sector has lost 6.3% on average in the year-to-date frame (as of February Array7, 20Array6) while the retail wholesale sector is down 5.2%. PowerShares Dynamic Retail ETF (PMR) is down 7.7% so far this year. The fund has a Zacks ETF Rank #2.

Given the fact that retail sales edged up 0.2% in January, better than the market expectation of 0.Array% growth, a look at the retail ETF seems justified. The fund added over 2.Array% in the last five trading sessions (as of February 24, 20Array6) (read: Retail ETFs to Watch Ahead of Q4 Results ).

Semiconductor

This is yet another sector, which has lost big time lately, probably as an extension of a sharp sell-off in the tech space. But most research agencies expect things in the semiconductor arena to improve in 20Array6 (read: Slew of Earnings Beat Fail to Cheer Semiconductor ETFs ).

This value-centric traditional tech area should expand modestly this year, primarily in the second half. iShares PHLX Semiconductor (SOXX) is down 7.5% so far this year but added over 0.8% in the last five trading sessions (as of February 24, 20Array6). The fund has a Zacks ETF Rank #Array (Strong Buy).

Construction

This space has shed Array2.2% so far this year (as of February 27, 20Array6), but investors can have a look at this housing ETF with a Zacks Rank #2 - SPDR S&P Homebuilders ETF (XHB) . This is especially true given the existing home sales touched a six-month high in January. The fund has retreated 9.7% year to date but climbed Array.4% in the last five trading sessions (as of February 24, 20Array6) (read: Time to Buy Housing ETFs Despite Mixed D.R. Horton Earnings? ).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

FT-DJ INTRNT IX (FDN): ETF Research Reports

SPDR-KBW REG BK (KRE): ETF Research Reports

MKT VEC-BIOTECH (BBH): ETF Research Reports

PWRSH-DYN RETL (PMR): ETF Research Reports

ISHARS-PHLX SEM (SOXX): ETF Research Reports

SPDR-SP HOMEBLD (XHB): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

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.

In This Story

SOXX PMR FDN KRE BBH

Other Topics

ETFs