Markets

Top-Ranked ETFs to Buy on the Dip This December

The start of December has brought volatility back in the stock market thanks to fresh Trump threats and rounds of downbeat economic data. Trump is planning to restore tariffs on steel and aluminum imports from Brazil and Argentina and proposed tariffs of up to 100% on $2.4 billion worth of French products.

The latest data shows that U.S. manufacturing sector contracted for the fourth straight month in November with a steep drop in new factory orders. U.S. construction spending also unexpectedly fell in October as investment in private projects tumbled to its lowest level in three years. The combination of weak data has rekindled worries about a slowing economy (read: 10 Best Performing Stocks of S&P 500 ETF).

Make the Most of the Dips

The beaten down prices offer a buying opportunity for investors, especially in the crucial holiday shopping season, which witnessed a strong start this year. Online sales jumped 14.5% year over year to a record $4.2 billion on Thanksgiving, 20% to a record $7.4 billion on Black Friday and 18% to $3.6 billion on Small Business Saturday. Notably, Thanksgiving sales surpassed $4 billion for the first time ever.

November marked the stock market’s strongest performance since June. The optimism surrounding the U.S.-China trade deal and better-than-expected corporate earnings have been bolstering investors’ confidence. Additionally, third-quarter GDP growth was revised upward recently. With around 25% gains so far this year, the S&P 500 is poised to rise further as the stock market enters a typically strong period (read: Top & Flop ETFs of November).

This is especially true as December has historically been the strongest month of the year despite the S&P 500 dropping more than 9% last year after months of selling. According to Sam Stovall, chief investment strategist at CFRA, the S&P 500 gained 1.6% on average with positive movements in 76% of the time.

Against this backdrop, investors should consider the dips to buy top-ranked ETFs for outsized gains in the coming weeks. Here we present six such funds that have declined in the latest session on fresh market woes but have a solid Zacks ETF Rank #1 (Strong Buy) or #2 (Buy).

Invesco DWA Technology Momentum ETF PTF – Down 2.2%

This fund follows the Dorsey Wright Technology Technical Leaders Index and provides exposure to technology companies that are showing relative strength (momentum). Holding 39 stocks in the basket, it charges 60 bps in annual fees. The product is illiquid and relatively unpopular with AUM of $208.9 million and average daily volume of 56,000 shares. It has a Zacks ETF Rank #2 with a High risk outlook (read: Tech Heads for Best Year in Decade: 5 Best ETFs, Stocks).

iShares U.S. Aerospace & Defense ETF ITA – Down 2.2%

This fund provides investors exposure to 34 U.S. companies that manufacture commercial and military aircrafts and other defense equipment by tracking the Dow Jones U.S. Select Aerospace & Defense Index. It has AUM of $5.7 billion and charges 42 bps in fees a year. Volume is good at around 149,000 shares. The ETF has a Zacks ETF Rank #2 with a Medium risk outlook.

First Trust S&P REIT Index Fund FRI – Down 1.7%

This ETF provides broad exposure to the real estate sector and holds 155 securities in its basket. It tracks the S&P United States REIT Index, charging investors 50 bps in annual fees. The fund has been able to manage $204.4 million in its asset base while trading in lower volume of around 63,000 shares a day. It has a Zacks ETF Rank #2 with a Medium risk outlook (read: Upbeat Data to Renew Confidence in Homebuilding ETFs).

Industrial Select Sector SPDR XLI – Down 1.6%

This is the most popular ETF in the industrial space with AUM of $11.2 billion and average daily volume of around 10 million shares. It follows the Industrial Select Sector Index, holding 69 stocks in its basket. This fund charges 13 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 4 Top-Ranked Cyclical Sector ETFs & Stocks for Q4).

Invesco NASDAQ Internet ETF PNQI – Down 1.6%

This fund offers exposure to the largest and most-liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. Holding 83 stocks in its basket, it has AUM of $537.3 million and trades in a lower volume of about 15,000 shares a day. It charges 62 bps in fees per year and has a Zacks ETF Rank #2 with a High risk outlook (read: Stocks & ETFs to Profit From Cyber Monday Deals).

Invesco Dynamic Semiconductors ETF PSI – Down 1.6%

This fund targets the semiconductor corner of the broad technology segment and follows the Dynamic Semiconductor Intellidex Index. With AUM of $202.4 million, it holds 30 securities in its basket and charges 58 bps in fees per year from investors. The product sees moderate average daily volume of 36,000 shares and has a Zacks ETF Rank #1 with a High risk outlook (read: 4 ETFs to Invest in Soaring Semiconductor Stocks).

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iShares U.S. Aerospace & Defense ETF (ITA): ETF Research Reports

Invesco DWA Technology Momentum ETF (PTF): ETF Research Reports

Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports

First Trust S&P REIT Index Fund (FRI): ETF Research Reports

Industrial Select Sector SPDR Fund (XLI): ETF Research Reports

Invesco Dynamic Semiconductors ETF (PSI): 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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