The U.S. stock market was stuck in a vicious sell-off in February as inflation fears and concerns over speedy rates hike unnerved investors during the month. The initial worries were triggered by the better-than-expected jobs report that pushed the major bourses into correction territory (a decline of more than 10% from their last peak reached in late January) in early month. Then, Fed minutes and the new Fed chairperson Jerome Powell took away some sheen from the riskier assets.
However, rounds of positive economic data as well as solid long-term fundamentals led to a rebound in stocks in the back half of the month.
Rising income, growing employment, optimism surrounding the new tax legislation as well as a surge in global economic growth, which continued to boost consumers’ confidence amid market turbulence, brightened up the outlook. In fact, the stocks recouped almost half of the losses seen early in the month.
That said, a few sectors have easily survived the market rout and are crushing the broad market this month. Below we have highlighted such four sectors and their best ETFs & stocks that have gained handsomely in February and could be better plays in the months ahead should the trends prevail.
Market-Beating Sector ETFs and Stocks: Technology
After being hit by the broad market selloff in early February, the technology sector came back roaring and remained the hot spot for investors given the dual tailwinds of a rising rate scenario and the new tax repatriation policy.
The emergence of cutting-edge technology such as cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, and artificial intelligence (AI) as well as strong corporate earnings are acting as the key catalysts.
The SPDR S&P Internet ETF (NYSEARCA:XWEB), which targets the Internet corner of the broad tech space turned out to be a winner, climbing 4.7% this month. It tracks the S&P Internet Select Industry Index and holds 68 stocks in its basket with an equal-weight exposure of around 2%.
The fund has accumulated $3.8 million in its asset base and charges 35 bps in fees from investors. It trades in a light volume of under 1,000 shares a day on average and carries a Zacks ETF Rank #3 (Hold).
Market-Beating Sector ETFs and Stocks: eGain Corp (EGAN)
Based in Sunnyvale, CA, eGain Corporation (NASDAQ:EGAN) provides customer engagement solutions and offers web customer interaction applications, social customer interaction applications and contact center applications.
The Zacks Consensus Estimate for 2018 has moved down from a loss of 11 cents to a loss of 13 cents over the past month but has an estimated earnings growth of 40.91% for this fiscal year (ending June 2018). It has a Zacks Rank #3 (Hold) and a VGM Score of C. The stock has gained about 57.4% in February.
Market-Beating Sector ETFs and Stocks: Biotech
The biotech sector got a boost from its non-cyclical nature, which provides a defensive tilt toward the portfolio in a turbulent market. Additionally, a wave of mergers and acquisitions and encouraging trends including faster drug approvals, new products and Trump’s tax reform are adding to the strength.
Loncar Cancer Immunotherapy ETF (NASDAQ:CNCR) tracks the Loncar Cancer Immunotherapy Index and provides exposure to a basket of companies that develop therapies to treat cancer by harnessing the body’s own immune system.
It holds 31 stocks with heavy concentration on the top firm at 9.06% while other firms account for no more than 5.82% share. The ETF has amassed $54.2 million in its asset base and trades in a lower average daily volume of around 24,000 shares. The expense ratio comes in at 0.79%. The product has gained 3.8% this month and carries a Zacks ETF Rank #2 (Buy) with a High risk outlook.
Market-Beating Sector ETFs and Stocks: Agenus Inc (AGEN)
Based in Lexington, MA, Agenus Inc (NASDAQ:AGEN) is engaged in the discovery, development and commercialization of immunotherapeutics for the treatment of life threatening and chronic medical conditions.
AGEN stock saw no earnings estimate revision for this year in the past month and its earnings are expected to decline 16.81%. It has a Zacks Rank #3 and a VGM Style Score of F. It is up nearly 46.2% this month.
Market-Beating Sector ETFs and Stocks: Steel
This sector is surging given the possible tariff talks on foreign producers of steel and aluminum in the interest of national security. Trump is looking to impose severe tariffs of 24% on steel imports and 10% for aluminum imports.
Additionally, President Donald Trump’s latest statement on reviving the industry has bolstered the confidence in the growth of the steel industry, pushing the stocks and ETF higher.
VanEck Vectors Steel ETF (NYSEARCA:SLX) provides pure play exposure to a small basket of 27 stocks by tracking tracks the NYSE Arca Steel Index. It is highly concentrated on the top firm – Rio Tinto (NYSE:RIO) – at 11% of assets while other securities hold no more than 8.9% share.
American firms dominate the fund’s returns at 37.2%, followed by Brazil (19.1%), the Netherlands (13.3%) and United Kingdom (11.1%). The ETF has amassed $177.6 million in its asset base and charges 55 bps in fees from investors. It trades in moderate volume of 64,000 shares a day on average and has added 2.9% this month.
Market-Beating Sector ETFs and Stocks: United States Steel Corporation (X)
Based in Pittsburgh, PA, the United States Steel Corporation (NYSE:X) is an integrated steel producer with major production operations in the United States and Central Europe. The company witnessed solid earnings estimate revision of 45 cents in the past month and its earnings are expected to grow a whopping 92.27% this year.
The stock has gained nearly 17.7% in February. It carries a Zacks Rank #1 (Strong Buy) and has a VGM Style Score of A.
Market-Beating Sector ETFs and Stocks: Retail
The retail sector showed upside potential thanks to a massive $1.5-trillion tax cut, which will provide consumers with extra cash that will lead to higher discretionary spending. Additionally, retailers, especially departmental stores are the biggest beneficiaries of the tax cut plan as they pay maximum taxes among the S&P 500 companies given their large domestic networks.
Amplify Online Retail ETF (NASDAQ:IBUY): This ETF offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index.
The fund comprises 39 stocks that are widely diversified, with each holding no more than 5.04% of assets. It has attracted $235.4 million in its asset base and charges 65 bps in fees per year. The product trades in a moderate volume of 70,000 shares a day and has gained 1.5% in February.
Market-Beating Sector ETFs and Stocks: Fossil Group Inc (FOSL)
Based in Richardson, TX, Fossil Group Inc (NASDAQ:FOSL) is engaged in designing, marketing and distribution of consumer fashion accessories. Though FOSL stock is expected to post earnings decline of 460% for this year, the Zacks Consensus Estimate moved up from a loss of 32 cents to a loss of 18 cents in the past month.
Additionally, Fossil Group has a Zacks Rank #3 and a VGM Score of A. The stock has soared about 68.7% in February.
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