Forget Big Tech, These 3 Underdog Sectors Are About to Steal the Show


  • Big tech still gets a lot of attention, but three underdog sectors are worth consideration this earnings season. 
  • Financials: It could be time for higher interest rates to turn from a headwind into a catalyst. 
  • Industrials: Increased infrastructure spending makes this sector attractive to dividend-seeking investors. 
  • Materials and Mining: The surge in precious metals is a key reason to consider this sector.  
underdog sectors - Forget Big Tech, These 3 Underdog Sectors Are About to Steal the Show

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Earnings season is underway and technology stocks continue to be on investors’ radars. Artificial intelligence (AI), cloud computing and cybersecurity are three sectors that will continue to provide opportunities for growth-hungry investors. But in a stock picker’s market, there are opportunities in underdog sectors if you know where to look. 

But growth won’t necessarily be easy to find. A hot CPI print, turmoil in the Middle East and concerns over lower corporate earnings are just three areas of concern for investors. There are others, including higher-for-longer interest rates.  

Some of what’s happening outside the market is just noise. And some of the concerns are legitimate but are still hypothetical. The playbook is the same whether you’re looking for technology stocks or stocks in underdog sectors. Look for strong earnings and stocks that are leaning into growth trends.

Let’s delve into three options with one ETF for each sector for investors who want exposure without picking individual stocks.  


Illustration of phone with dollar sign and other graphics symbolizing fintech displayed on and around it, with a blue background. Fintech Stock Bargains

Following market tradition, the big banks have already reported earnings, and the results were mostly good. Nevertheless, the market sold off sharply after the reports as each bank expressed caution about the direction of the economy.  

But the sell-off seems premature and maybe overdone. Banks were hit hard not because interest rates have risen (they’re “low” by historical levels). But the pace at which they got there was disruptive for leveraged banks. As the past few quarters proved, the banking industry remains resilient. Thus, because of their vital role in the world economy, they deserve consideration for your portfolio.  

An ETF option in the financial sector is the Fidelity MSCI Financials Index ETF (NYSE:FNCL). The fund has posted an impressive 55% gain in the last five years. The fund’s 50 holdings include all of the major banks and has $1.57 billion assets under management (AUM).  


robotic arms over medical bed symbolizing medical robotics. favorite robotics stocks to buy

The industrials sector often brings to mind heavy equipment and stocks like Caterpillar (NYSE:CAT). And companies like Caterpillar should do well as more infrastructure money continues to flow into the economy.  

However, in 2024 this sector includes areas like robotics and the internet of things (IoT). These are areas that are the logical extension of businesses that are creating machine learning and AI models. Plus, this is another sector that will benefit from the move towards more sustainable manufacturing solutions. 

An ETF option in the Industrials sector is the Vanguard Industrials ETF (NYSEARCA:VIS). The fund has around 50 holdings with $5.22 billion of AUM. The P/E ratio of 26.4x is a little higher than the S&P 500 average, but reflects the nature of a fund that includes both growth and value investments. The fund also has a 1.19% dividend yield and a low 0.10% expense ratio.  

Materials and Mining 

a cart filed with gold in a gold mine
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To understand the bullish argument for the mining sector being one of the underdog sectors to buy, look at the price of gold which is up 26% in just months. But mining stocks such as Barrick Gold (NYSE:GOLD) have not participated in the rally. In fact, GOLD stock is down 8.9% as of the market close on April 17.  

But analysts project earnings growth for mining stocks which should drive stock price growth. And silver and copper are also expected to rise as the world continues to move to greener, more sustainable technologies, which will drive the growth in these commodity prices.  

If you’re not interested in picking individual stocks, the SPDR S&P Metals & Mining ETF (NYSEARCA:XME) is a solid choice. It contains 34 holdings with $2.09 billion of AUM. It also has a P/E ratio of 6.38x which is a discount to the broader market. And, the fund pays a respectable dividend yield of 1.34%, and it has a modest 0.38% net expense ratio.  

On the date of publication, Chris Markoch did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines. 

Chris Markoch is a freelance financial copywriter who has been covering the market for over five years. He has been writing for InvestorPlace since 2019.

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