The Q4 2013 earnings season has seen a weak start but is gradually showing impressive numbers that could touch the all-time quarterly high. The quarter’s earnings growth is nearing the highest level seen in 2013.
Total earnings for the S&P 500 companies that have reported so far are up 12% on an annual basis with beat ratio of 70.8% while revenues increased 1.8% with a beat ratio of 51.1%.
From a sector perspective, aerospace is the star performer with a beat ratio of 100% for earnings and 62.5% for revenues. The medical sector follows closely with earnings and beat ratio of 87% and 56.5%, respectively, as per the Zacks Earnings Trends.
The basic materials space is a key contributor to earnings, accounting for 40.7% of overall growth. On the revenue front, the homebuilding and construction sector has contributed the maximum (18.5%) to quarterly growth.
Considering all the key metrics, a few equity ETFs have impressed with their performances and generated solid returns from the year-to-date look. While there are winners in many corners of the space, below we highlight the top ETFs that have performed well on robust earnings :
PureFunds ISE Junior Silver ETF (SILJ)
SILJ is the biggest beneficiary not only in the material space but also in the broad ETF world. This product provides a true small cap play on the silver mining space.
The fund has managed assets worth $1.7 million and trades in a paltry volume of less than 6,000 shares a day. The ETF tracks the ISE Junior Silver Small Cap Miners/Explorers Index and charges 69 bps in annual fees.
In total, the fund holds about 24 companies with the largest allocation going to the top three firms – Fortuna Silver Mines (FSM), Endeavour Silver (EXK) and Silvercorp Metal (SVM) –each making up nearly 12%. In terms of country exposure, Canadian firms dominate the fund at 74% while the U.S. securities make up for a 25% share. SILJ has added about 15% since the start of 2014.
SPDR S&P Biotech ETF (XBI)
This fund provides exposure to the biotech segment of the broad healthcare space by tracking the S&P Biotechnology Select Industry Index. The product has roughly $1.2 million in AUM and trades about 336,000 shares in volume a day, while charging only 35 basis points a year. The ETF is slightly tilted toward small caps which account for about 58% of the portfolio while mid and large caps take the rest.
Holding 71 securities in its basket, the product is largely concentrated on the top firm – Intercept Pharmaceuticals (ICPT) – with 6.03% allocation. Other securities do not account for more than 2.41% of assets. The fund is up over 10% so far this year and has a Zacks ETF Rank of 1 or ’Strong Buy’ with ‘High’ risk outlook.
Bottom Line
These products are clearly outpacing the broad market funds by wide margins and will remain the forerunners if the current trends continue in the weeks ahead. They could also be funds to focus on for those worried about the broad market's direction, as they have proven to be resilient in what has otherwise been a very difficult time for stocks.