October 26, 2020

5 Sector ETFs Gaining in Double Digits to Start October

Wall Street registered back-to-back weekly gains with the S&P 500 and Nasdaq Composite Index seeing their best week since July, and the Dow Jones enjoying biggest weekly rise since August.

The optimism came primarily on the back of prospects for another round of fiscal stimulus from Congress. Per Fox Business News, there were “really good” odds of reaching a deal with Democrats in Congress on a new round of coronavirus stimulus for the battered U.S. economy. A report from the Wall Street Journal stated that Treasury Secretary Steven Mnuchin is drafting a proposal worth $1.8 trillion, closer to the $2.2 trillion package proposed by U.S. House Speaker Nancy Pelosi (read: 5 ETFs Rising as ‘Reflation Trade’ Picks Up on Stimulus Hope).

Additionally, growing expectations of a Democratic victory in next month’s presidential election is driving the stocks higher. Market speculators believe that if the Democrats take the White House and both chambers of Congress, then fiscal stimulus will be enacted without big delays, which would support stocks and the dollar. The new analysis by FiveThirtyEight showed about 68% chances of the Democrats winning the Senate as well as holding the House of Representatives, raising the prospects for significant further stimulus.

While there have been winners in many corners of the space, we here highlight five sector ETFs that have outperformed the market last week, gaining in double digits.

Credit Suisse S&P MLP ETN MLPO – Up 26.7%

Most MLPs are engaged in the processing and transportation of energy commodities such as natural gas, crude oil and refined products. As such, they are not directly linked to the price of oil and are likely to be the major beneficiaries of an oil boom in the long term. Acting as toll takers, these MLPs earn revenues on volumes that flow through pipes and not on the commodity price. This ETN is linked to the S&P MLP Index, which includes both master limited partnerships and publicly traded limited liability companies having a similar legal structure to MLPs and sharing the same tax benefits. It is unpopular and illiquid in the MLP space with AUM of $14.4 million and average daily volume of under 1,000 shares. The note charges 95 basis points (bps) in annual fees.

The Cannabis ETF THCX – Up 18.6%

Cannabis stocks fly higher as Democratic vice president nominee Kamala Harris promised that a potential Biden administration would decriminalize marijuana. Additionally, Vermont has become the 11th state to legalize recreational marijuana. This ETF offers investors exposure to a basket of stocks that are expected to benefit from growth of the hemp and legal marijuana industries. Holding 29 stocks in the basket, the fund has amassed about $19.4 million in its asset base and trades in a good volume of about 29,000 shares per day, on average. It charges 70 bps in annual fees (read: Cannabis ETFs Surge on Kamala Harris’ Decriminalizing Marijuana Pledge).

ARK Genomic Revolution Multi-Sector ETF ARKG – Up 16.4%

The biotech sector has been performing well driven by the progress in the development of a coronavirus vaccine or treatment, and waves of mergers and acquisitions. In fact, this actively managed ETF has been the biggest beneficiary, focusing on companies likely to benefit from extending and enhancing the quality of human and other life by incorporating technological and scientific developments along with improvements and advancements in genomics into their business. With AUM of $2.3 billion, the fund holds 44 stocks in its basket and has 0.75% in expense ratio. It trades in average daily volume of 824,000 shares.

Invesco Solar ETF TAN – Up 13.6%

The solar industry has been on fire buoyed by the presumptive Democratic presidential candidate Joe Biden’s push for clean energy and infrastructure plans. TAN offers global exposure to the solar industry by tracking the MAC Global Solar Energy Index, holding 32 stocks in the basket. U.S. firms dominate half of the fund’s portfolio, followed by China (26.2%) and Germany (5.7%). The product has amassed $1.5 billion in its asset base and trades in a solid volume of around 824,000 shares a day. It charges investors 71 bps in fees per year and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: Investors Flock Green Energy Before Election: Top ETFs, Stocks).

VanEck Vectors Rare Earth/Strategic Metals ETF REMX – Up 11.5%

Rare earth metals got a boost from President Donald Trump’s recently signed executive order declaring national emergency in the mining industry in a move to shore domestic supplies of rare earths minerals. REMX offers exposure to companies engaged in producing, refining and recycling of rare earth and strategic metals and minerals. It follows the MVIS Global Rare Earth/Strategic Metals Index, holding 20 stocks in its basket. The ETF has AUM of $173.1 million and average daily volume of 222,000 shares. From a country look, Chinese firms dominate the portfolio with 43% share, closely followed by Australia (27.2%) and Canada (10.5%). The product charges 60 bps in annual fees.

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Invesco Solar ETF (TAN): ETF Research Reports

VanEck Vectors Rare EarthStrategic Metals ETF (REMX): ETF Research Reports

Credit Suisse SP MLP Index ETN (MLPO): ETF Research Reports

ARK Genomic Revolution ETF (ARKG): ETF Research Reports

The Cannabis ETF (THCX): ETF Research Reports

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