Talks ofreopening of the economy and an improvement in virus cases have injected a new-found enthusiasm into Wall Street bulls. Recent datapoints showed that the outbreak is gradually coming under control, even in the hardest-hit states. Some upbeat earnings and positive Data for Gilead's (NASDAQ:GILD) Remdesivir acted as other tailwinds (read: Wall Street At 7-Week High: 5 Sector ETFs On Fire).
Treasury Secretary Steven Mnuchin indicated that we may see “the economy really bounce back in July, August and September” after reopening in May and June. All these have benefited the S&P 500, the Nasdaq (NASDAQ:NDAQ) and the Dow Jones by 18.9%, 21.1% and 17.6%, respectively, in the past month (as of Apr 29, 2020). In the past five days, the three indexes gained 5.0%, 4.9% and 4.9%, respectively. Invesco (NYSE:IVZ) S&P 500 High Beta ETF SPHB that is invested in high-beta stocks added 6% in the past five days.
With so much of government and central bank policy easing around, Wall Street’s mood should be upbeat in the coming days, unless there are not any negative developments on the virus front. Note that the zero-interest rate policy and unlimited QE should give a support to the corporate America. Plus, there is the government’s $2-trillion package in place. The government also extended Paycheck Protection Program (PPP), which is called Phase 3.5.
Given the bullishness, investors might find high-beta ETFs profitable, at least for the near term.
High-Beta ETFs
Beta is directly related to market movement. Notably, high-beta funds tend to rise or fall more than the stock market and are thus more volatile. A beta that is greater than 1.0 is prone to be more volatile and gainful. When markets soar, high-beta funds experience larger gains than the broader market counterparts and thus, outpace their rivals.
However, it is always better to be cautious in a trying time like this. So, we have highlighted the ETFs that have a P/E less than 17x boasted by the S&P 500 ETF SPY and a beta greater than one.
Invesco S&P MidCap 400 Pure Value ETF RFV
The underlying index measures the performance of securities that exhibit strong value characteristics in the S&P MidCap 400 Index (read: Small-Caps Bounce Back: Buy 8 Trending ETFs).
Zacks Rank: #3 (Hold)
Beta: 1.59x
P/E: 7.83x
One-month Performance: Up 22.9%
SPDR S&P Homebuilders (NYSE:XHB) ETF XHB
The fund gives exposure to the homebuilding sector.
Zacks Rank: #2 (Buy)
Beta: 1.35x
P/E: 12.08x
One-month Performance: Up 22.7%
SPDR S&P Retail (NYSE:XRT) ETF XRT
The fund offers exposure to the retail segment of the S&P Total Market Index.
Zacks Rank: #2
Beta: 1.19x
P/E: 13.61x
One-month Performance: Up 26.3%
Principal Healthcare (NYSE:HTA) Innovators Index ETF BTEC
The underlying index of the fund uses a quantitative model designed to identify equity securities in the Nasdaq US Benchmark Index (including growth and value stock) that are small and medium capitalization U.S. healthcare companies.
Zacks Rank: #2
Beta: 1.33x
P/E: 14.44x
One-month Performance: Up 26.3%
SPDR S&P Technology Hardware ETF XTH
The fund has exposure to industries like Electronic Components, Electronic Equipment & Instruments, and Technology Hardware, Storage & Peripherals.
Zacks Rank: #2
Beta: 1.42x
P/E: 15.14x
One-month Performance: Up 19.0%
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SPDR S&P 500 ETF (NYSE:SPY): ETF Research Reports
SPDR S&P Homebuilders ETF (XHB): ETF Research Reports
SPDR S&P Retail ETF (XRT): ETF Research Reports
SPDR S&P Technology Hardware ETF (XTH): ETF Research Reports
Invesco S&P MidCap 400 Pure Value ETF (RFV): ETF Research Reports
Invesco S&P 500 High Beta ETF (SPHB): ETF Research Reports
Principal Healthcare Innovators Index ETF (BTEC): ETF Research Reports
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