3 ETF Winners From November

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December 4, 2013 12:05pm NYSE:IAI NYSE:XAR

new etfsNovember continued 2013’s strong rally, as investors breezed by concerns over political issues to push stocks higher. Both the major U.S. benchmarks – Dow Jones and the S&P 500 – broke milestones with the DJIA hitting 16,000 and S&P 500 crossing 1,800


for the first time in history.

The S&P 500 returned nearly 3% while the Dow generated a little more at 3.5%. This is largely thanks to Fed easing monetary policies, recovering housing fundamentals, healing job market and increasing consumer confidence. Further, improving conditions in Europe and China propelled the market higher.

Investors should note that a couple of equity funds were clearly the biggest beneficiaries of these trends in November. While there have been winners in every corner of the space, the following three ETFs were the largest gainers in their respective sectors.

The trio has top Zacks ETF Ranks, suggesting bullish trends in the coming months as well. Any of these could be better plays in the current market and may continue to outperform:

SPDR S&P Pharmaceuticals ETF (NYSEARCA:XPH)

Currently, pharma is leading the healthcare world thanks to strong Q3 earnings growth, new drug approvals, increasing merger & acquisition activities and an ageing population. This trend is expected to continue given the bullish outlook and estimates (read: 3 Pharma ETFs Leading the Healthcare Sector).

The best performing ETF in November in this corner of the space was State Street’s XPH. The fund tracks the S&P Pharmaceuticals Select Industry Index, holding 32 securities in its basket. The product has $695.4 million in AUM and trades nearly 94,000 shares a day, while its cost is just 35 basis points a year.

The product is well spread across each security as the top 10 holdings account for less than 42% of the total assets. Endo Health Solutions (ENDP), Santarus (SNTS) and Jazz Pharmaceuticals (JAZZ) occupy the top three positions in the basket with a combined 14% share. While large caps account for 43% of total assets, small and mid caps take the remainder.

The product generated a double-digit return of nearly 12% last month. The fund has a Zacks ETF Rank of 2 or ‘Buy’ rating with ‘Low’ risk outlook.

iShares Dow Jones US Broker-Dealers ETF (NYSEARCA:IAI)

Here again, the broker-dealer is leading the way higher in the broad financial sector as of late driven by a steepening yield curve, and greater volatility in the markets which has assisted exchanges.

This corner of the market has already suffered the Fed’s ‘no taper’ shocker but is again drawing interest as speculations of a stimulus cut anytime soon have resurfaced. This has led to a great month for the broker dealer ETF, as this fund rose 9.7% in the last four weeks.

This fund provides exposure to the investment services segment of the broad U.S. financial sector by tracking the Dow Jones U.S. Select Investment Services Index. The product currently holds 22 securities and invests around 61% of total assets in its top 10 holdings. Intercontinental Exchange (ICE), Goldman Sachs (GS) and Morgan Stanley (MS) are the top three elements in the basket.

The fund has accumulated $190.5 million in AUM while it sees good volume of nearly 80,000 shares a day. The product charges 45 bps in fees per year from investors. The ETF currently has a Zacks ETF Rank of 2 or ‘Buy’ rating, with a ‘Medium’ risk outlook (read: Why IAI Is a Great Financial ETF).

SPDR S&P Aerospace & Defense ETF (NYSEARCA:XAR)

Despite budget-related worries, the aerospace sector has been on a tear for much of 2013 mainly due to strong momentum in the commercial aviation market and a string of earnings beats. Technological innovation, big contracts, international orders, acquisitions, growing commercial demand and a pickup in defense spending are fueling growth in the sector.

One great way to play the sector’s surge is with XAR. This was not only a top performing ETF in November but is also leading from a year-to-date look. The fund gained nearly 7.5% last month, suggesting bullish sentiments for the industry heading toward the New Year.

This product seeks to invest its total asset base of $29.1 million in 37 stocks by tracking the S&P Aerospace & Defense Select Industry Index. The ETF charges 0.35% in fees and expenses while trades in paltry volume (see: all the Industrial ETFs here).

The fund follows an equal allocation strategy that prevents heavy concentration and suggests higher diversification benefits. Spirit AeroSystems Holdings (SPR), Alliant Techsystems (ATK) and Boeing (BA) are the top three spots with a combined share of 14.29% in the fund’s portfolio.
XAR currently has a Zacks ETF Rank of 1 or ‘Strong Buy’ with ‘Low’ risk outlook.

This article is brought to you courtesy of Eric Dutram.


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