Investor interest in exchange-traded funds (ETFs) has been increasing. Over the past four decades, the popularity of ETFs have grown, allowing investors to track the performance of various indices across many asset classes. For many market participants, they have become a more liquid, lower-cost alternative to mutual funds. In addition to passive funds, there are also actively-managed ETFs. Today’s article introduces seven ETFs to buy in the second quarter of the year.
According to State Street (NYSE:SST), “ETFs are off to their best start ever for a year, taking in over $150 billion in the first two months.” And “Equity ETFs, led by cyclical exposures at the sector and style level, fueled the record setting flows.” The Federal Reserve also points to the growing significance of ETFs for investors in emerging markets.
Recent research led by Vikas Agarwal of the College of Business, Georgia State University, highlights, “Contributing to the rapid success of ETFs are the numerous advantages they provide investors among which are increased access to asset classes and markets, as well as, improved tax efficiency, liquidity, price discovery, and transparency.”
Therefore, we can expect new funds, especially with thematic focuses, to enter Wall Street in the coming quarters. With that information, here are seven of the best ETFs to buy for Q2:
- Amplify Transformational Data Sharing ETF (NYSEARCA:BLOK)
- Blackrock Future Innovators ETF (NYSEARCA:BFTR)
- First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (NASDAQ:GRID)
- Global X Internet of Things ETF (NASDAQ:SNSR)
- iShares US Home Construction ETF (NYSEARCA:ITB)
- SPDR S&P Semiconductor ETF (NYSEARCA:XSD)
- Vanguard Consumer Discretionary Index Fund ETF Shares (NYSEARCA:VCR)
ETFs to buy: Amplify Transformational Data ETF (BLOK)
52 Week Range: $13.04 – $62.94
1-year Price Change: About 312%
Dividend Yield: 1.15%
Expense Ratio: 0.71% per year, or $71 per $10,000 invested annually
The first fund for today is the Amplify Transformational Data Sharing ETF, which focuses on blockchain technologies. Since its inception in January 2018, net assets have grown to around $1.2 billion.
Blockchain reminds most readers of cryptocurrencies, such as Bitcoin (CCC:BTC-USD), Cardano (CCC:ADA-USD), Ethereum (CCC:ETH-USD), Dogecoin (CCC:DOGE-USD), or Ripple (CCC:XRP-USD) that are frequently in the headlines. Such cryptos are based on blockchain technology whose application goes well beyond the digital currency asset class.
Based on a distributed ledger technology (DLT), blockchain is a digital record-keeping system. It is decentralized, immutable, transparent, and anonymous. In this peer-to-peer (P2P) topology, others get to see can see entries in near real-time. Analysts expect many industries to increasingly adopt blockchain technologies.
BLOK, an actively-managed fund, has 54 stocks. The firms in the ETF mostly come from North America (56.8%) and Asia-Pacific (36.8%).
Among the top names are Canaan (NASDAQ:CAN), provider of supercomputing solutions, MicroStrategy (NASDAQ:MSTR), which provides enterprise software platforms, digital asset, Riot Blockchain (NASDAQ:RIOT), which focuses on Bitcoin mining, and Marathon Patent Group (NASDAQ:MARA), which acquires and monetizes patents and patent rights.
Since the start of the year, BLOK is up over 58% and hit a record high on Feb. 19. If you want to invest in businesses that utilize blockchain technology without the daily volatility seen in cryptocurrencies, you could consider putting the ETF on their radar screen.
BlackRock Future Innovators ETF (BFTR)
52 Week Range: $35.22 – $57.75
Price Change: 39.15% (since October 2020)
Dividend Yield: N/A
Expense Ratio: 0.80% per year
Second on my list is the Blackrock Future Innovators ETF. Its objective is long-term capital appreciation by investing in innovative companies. The focus is mostly small-capitalization and mid-cap businesses. As an actively managed fund, it targets sectors that could potentially impact the future of the economy.
BFTR stock — which tracks the Russell 2500 Growth Index — has 62 stocks. Since its inception in late September, assets under management have surpassed $20 million. The information technology (IT) and health care sectors currently have the highest allocation, each with around 30%. Next in line are consumer discretionary businesses at 15.02%, industrials at 12.02% and consumer staples at 5.39%.
The fund’s top holdings include firms like the law enforcement technology solutions provider Axon (NASDAQ:AXON), the online car-buying platform Vroom (NASDAQ:VRM) and the patient-intake software solutions provider Phreesia (NYSE:PHR). BFTR returned about 6.19% year-to-date (YTD).
Given the increased volatility in the markets, this ETF could come under pressure in the short run. Any decline toward $45 or even below would improve the margin of safety for long-term investors.
First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund (GRID)
52 Week Range: $35.96 – $88.22
1-year Price Change: About 124%
Dividend Yield: 0.63%
Expense Ratio: 0.70% per year
The First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index Fund provides exposure to the grid and electric energy infrastructure sector. Such businesses usually focus on energy networks, storage, hardware like electric meters, or software.
GRID, which follows the NASDAQ OMX Clean Edge Smart Grid Infrastructure Index, currently has 64 stocks. The fund has around $236.64 million in net assets. The fund’s leading 10 holdings comprise over 55% of the holdings.
Heating, ventilation, and air conditioning (HVAC) products manufacturer Johnson Controls International (NYSE:JCI), motor vehicle parts and accessories supplier Aptiv (NYSE:APTV), electrical equipment and automation products group ABB (NYSE:ABB), and power management group Eaton (NYSE:ETN) are among the top businesses.
In the past year, investor appetite in green energy sources has been strong. YTD, the fund is up 6.19% and hit a record high in early January. A potential short-term decline toward $80 may offer a better entry point for long-term investors.
Global X Internet of Things ETF (SNSR)
52 Week Range: $14.81 – $35.64
1-year Price Change: About 105.28%
Dividend Yield: 0.21%
Expense Ratio: 0.68% per year
The Global X Internet of Things ETF invests in firms focusing on technologies related to Internet of Things (IoT). International Business Machines (NYSE:IBM) describes IoT as “the concept of connecting any device (so long as it has an on/off switch) to the Internet and to other connected devices.” Recent metrics show IoT spending will “achieve a compound annual growth rate (CAGR) of 11.3% over the 2020-2024 forecast period.”
SNSR currently has 45 holdings. Around half of the firms are based in the U.S., followed by Switzerland (15.1%), Taiwan (9.7%), Britain (5.6) and Austria (4.9%). The fund’s sectoral weighting is tilted toward IT (72.5%), followed by industrials (23.2%) and healthcare (4.3%).
Taiwan-headquartered Advantech — a leading name in IoT intelligent systems, California-headquartered chip firm Skyworks Solutions (NASDAQ:SWKS), and Switzerland-based semiconductor technology businesses STMicroelectronics (NYSE:STM) are among the leading businesses. So far in 2021, the fund is up over 4.8%. IoT is a high growth area that is likely to increasingly become part of lives. Long-term investors would find better value around $30.
iShares U.S. Home Construction ETF (ITB)
52 Week Range: $22.39 – $66.22
1-year Price Change: About 141.18%
Dividend Yield: 0.4%
Expense Ratio: 0.43% per year
Despite economic challenges posed by Covid-19, the housing sector stateside has remained healthy. My next choice, the iShares US Home Construction ETF, focuses mostly on residential home manufacturers. Since its inception in May 2006, assets under management have grown to $2.37 billion.
ITB, which tracks the Dow Jones US Select Home Construction index, has 46 stocks. The most significant sectors by weighting are homebuilding (65.81%), building products (14.19%), home improvement retail (9.85%) and specialty chemicals (3.76%). DR Horton (NYSE:DHI), Lennar (NYSE:LEN), NVR (NYSE:NVR) and Pultegroup (NYSE:PHM) lead the companies in the ETF.
YTD, the fund has increased by over 18% and hit a record-high in February. Long-term portfolios might benefit from some exposure to this important sector of the economy.
SPDR S&P Semiconductor ETF (XSD)
52 Week Range: $68.95 – $203.60
1-year Price Change: About 91%
Dividend Yield: 0.42%
Expense Ratio: 0.35% per year
Over the past decade, semiconductor firms have been the catalyst behind the juicy returns in broader markets. The SPDR S&P Semiconductor ETF provides exposure to 38 chip names with a range of market capitalizations. XSD, which tracks the S&P Semiconductor Select Industry Index, is an equal-weight fund. Therefore, it might appeal to investors looking for exposure to mid- and small-cap names in the sector.
The fund began trading in January 2006 and assets under management are around $1,026 million. Synaptics (NASDAQ:SYNA), which focuses on manufacturing chips used mostly in consumer devices with wireless connectivity, energy group SunPower (NASDAQ:SPWR), and chip heavyweights Micron Technology (NASDAQ:MU) and Intel (NASDAQ:INTC) comprise the top names in the roster.
Since the start of 2021, XSD has returned about 8% and hit a record high in recent weeks. Given the volatility we are witnessing in the segment and many tech names, a short-term decline toward $165 is possible. Such a decline would give a better opportunity to go long XSD.
Vanguard Consumer Discretionary Index Fund ETF Shares (VCR)
52 Week Range: $118.99 – $300.59
1-year Price Change: About 123%
Dividend Yield: 1.59%
Expense Ratio: 0.10% per year
Our last fund, the Vanguard Consumer Discretionary Index Fund ETF Shares, provides access to consumer discretionary businesses. These stocks are usually sensitive to economic cycles. On the services side, such names include lodging and leisure (such as restaurants or hotels), travel and consumer retailing. Manufacturing sectors include automotive, household durable goods, apparel and leisure equipment.
VCR, which tracks the returns of the Consumer Discretionary Spliced Index, has close to 300 stocks. The fund began trading in January 2004, and assets under management stand at $5.8 billion. In terms of sectors, internet & direct marketing retail heads the ETF (29.1%). Next in line are automobile manufacturers (12.4%), restaurants (9.4%), and home improvement retail (8.3%).
YTD, the fund is up more than 7% and saw a record high in early February. A potential decline toward $280 or below would improve the margin of safety.
On the date of publication, Tezcan Gecgil did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Tezcan Gecgil has worked in investment management for over two decades in the U.S. and U.K. In addition to formal higher education in the field, she has also completed all 3 levels of the Chartered Market Technician (CMT) examination. Her passion is for options trading based on technical analysis of fundamentally strong companies. She especially enjoys setting up weekly covered calls for income generation.