U.S. stocks have been performing strongly this month on a dovish Fed and strong labor market. The longest government shutdown that lasted for 35 days was unable to take the sheen away from Wall Street (read: ETF Winners & Losers in One-Month Long Government Shutdown).
The gains came despite global issues like the still unresolved U.S.-China trade war, global growth concerns, geopolitical tensions, Brexit and slowdown in the world’s second-largest economy. Weak corporate earnings also added to the woes.
While the gains were broad-based, we have highlighted four sectors ETFs that have outperformed the market in January and could be better plays in the months ahead should the trends prevail.
ETFMG Alternative Harvest ETF MJ – Up 33.2%
After being beaten down in the fourth quarter of last year, the marijuana ETF regained momentum as investors are capitalizing on the huge potential of the global cannabis industry. The pot industry is emerging and poised for rapid growth given its widespread legality, FDA’s first approval of a cannabis-derived drug and the resultant wave of deals. MJ is the first and only pure ETF targeting the cannabis/marijuana industry. The fund tracks the Prime Alternative Harvest Index, designed to measure the performance of companies within the cannabis ecosystem, benefiting from global medicinal and recreational cannabis legalization initiatives. The fund holds 37 securities in its basket and charges 75 bps in annual fees. The ETF has AUM of $826.2 million and trades in a good volume of around 869,000 shares (read: What Makes Marijuana ETF the Best Performer in January?).
SPDR S&P Oil & Gas Equipment & Services ETF XES – Up 20.2%
Oil price has gained this month on falling production, OPEC-led fresh crude output cuts and hopes of a trade deal between the United States and China. The U.S. sanctions on Venezuela’s oil exports lately also supported the oil price. With AUM of $212.5 million, this fund tracks the S&P Oil & Gas Equipment & Services Select Industry Index, which measures the performance of the companies engaged in the oil and gas equipment and services industry. It holds 40 securities in its basket and charges 35 bps in annual fees. The fund trades in a solid average daily volume of 1.6 million shares and has a Zacks ETF Rank #4 (Sell) with a High risk outlook.
Invesco Solar ETF TAN – Up 18.6%
Solar stocks have been on a tear buoyed by solid outlook from solar panel makers for this year. This ETF offers global exposure to the solar industry by tracking the MAC Global Solar Energy Index, holding 22 stocks in the basket. American firms dominate the fund’s portfolio with nearly 42.2% share, followed by China (27.3%) and Spain (8.2%). The product has amassed $268.8 million in its asset base and trades in solid volume of around 99,000 shares a day. It charges investors 70 bps in fees per year and has a Zacks ETF Rank #4 with a High risk outlook.
SPDR S&P Bank ETF KBE – Up 15.2%
The financial is one of the best performing sectors so far this year led by banks. This is because bank earnings have been better than expected and the sector has attractive valuation after being slammed in December. KBE offers equal-weight exposure to 85 banking stocks by tracking the S&P Banks Select Industry Index. It has amassed $2.8 billion in its asset base and trades in average daily volume of 2.8 million shares. The fund charges 35 bps in annual fees and carries a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Should You Buy Bank ETFs After Q4 Earnings?).