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Biotechs Soared In June; Japan, Small Caps Also Outperformed

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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%.

[ibdchart symbol="XBI" type="daily" size="threequarter" position="leftchart" /]

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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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.

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