Credit: Shutterstock photoMost of the same exchange traded funds topped their respective categories again the past month, but one new entry stands out.
[ibd-display-video id=2382612 width=50 float=left autostart=true]Innovator IBD 50 ( FFTY ) came in at the top of the U.S. diversified stock category with a year-to-date gain of 37.2% through Oct. 17, well more than double the S&P 500's 14.3% return. Its one-month return of 7% also outperformed the other funds making the list, according to Morningstar Direct.
The fund, launched in April 2015 in partnership with Innovator Capital Management, has attracted $113.3 million in assets. FFTY tracks the IBD 50 Index, which comprises the top 50 growth stocks selected by IBD. These companies tend to share characteristics of the market's biggest winning stocks, including outstanding profit growth and sales growth, wide profit margins and a high return on equity. The fund is conviction weighted, so the highest ranked stocks carry a higher percentage of assets.
The fundamental and technical metrics used to select IBD 50 stocks are based on decades of research started by William O'Neil, IBD's founder and chairman, in the 1960s. He developed the CAN SLIM investing system, which takes into account current and annual earnings, new products, service or management, stock price performance, leadership, institutional ownership, and the overall market.
FFTY's top holdings as of Oct. 19 included names that are familiar to IBD readers such as chip gear maker Lam Research ( LRCX ), organic light-emitting diodes technology firm Universal Display ( OLED ), Chinese internet company Sina ( SINA ) and graphics chip designer Nvidia ( NVDA ).
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With Innovator Capital Management 's IBD 50 ETF, you can trade the IBD 50 in just one transaction. FFTY is extended from a 30.23 flat-base buy point cleared in late August. It carries a 0.80% expense ratio. Learn more about improvements to the IBD 50 index at our upcoming webinar .
After leading the U.S. diversified group for the past few months, iShares Edge MSCI USA Momentum Factor (MTUM) slipped to second place with a 30% YTD gain. PowerShares QQQ Trust (QQQ) moved to third from second place last month with a 26.7% gain. MTUM is extended from a late August rebound off its 50-day moving average, but QQQ remains in a buy zone from a 146.06 flat-base entry and from a bounce off the 50-day last month.
Stock Market Outlook
With the major market indexes trading near record highs as earnings season goes into full swing, what are pundits' expectations for the stock market?
"2017 earnings momentum is strong," BlackRock's Global Chief Investment Strategist Richard Turnill noted in his weekly commentary. "Fading prospects for tax reform have been largely discounted, leaving room for positive surprises. We like value, momentum, financials, technology and dividend growers."
U.S. Bank Chief Equity Strategist Terry Sandven also offers a positive view.
"On balance, we continue to believe that the fundamental and technical backdrops warrant a risk-on bias," he said in a recent note. "Increasing earnings, restrained inflation, an accommodative Fed and constructive technical trend lines provide valuation support and the basis for stocks to trend higher."
However, both experts noted that the recent spate of hurricanes could affect certain sectors and/or the economy.
Top Sector ETFs
Moving on to the sector category, the same two funds claimed the No. 1 and 2 spots for at least a third straight month: ARK Innovation (ARKK) and ARK Web x.0 (ARKW), in that order. ARKK has racked up a 68.9% YTD gain; ARKW has rallied 61.5%.
ARKK, with $183.4 million in assets, invests in companies poised to benefit from innovation in sectors including health care, information technology, alternative energy and robotics. Its top holdings as of Oct. 18 were Tesla (TSLA), Stratasys (SSYS) and Twitter ( TWTR ). The fund also offers digital currency exposure via Bitcoin Investment Trust (GBTC), one of its top 10 names.
ARKW, which targets companies that are transforming economic sectors with internet-enabled innovation, has gathered $108.2 million in assets. Its top holdings included Amazon.com (AMZN), GBTC, Nvidia and Netflix (NFLX). ARKK launched in October 2014 and ARKW in September 2014. Both ETFs bear a 0.75% expense ratio.
Among other sector funds, semiconductors had a good showing in the past month, thanks to big moves by chip stocks such as Nvidia, Applied Materials (AMAT) and Lam Research. PowerShares Dynamic Semiconductors (PSI) surged 9.9% for a 44.4% YTD gain, VanEck Vectors Semiconductor (SMH) rose 7.2% for a 36.4% YTD return, and iShares PHLX Semiconductor (SOXX) added 6.8% to bring its YTD performance to 36.1%.
IBD'S TAKE:On the hunt for ETF ideas that may be worth a closer look? Check out IBD's weekly ETF Leaders column for a featured fund and a list of highly rated ETFs.
In the foreign stock arena, China and Brazil dominated. KraneShares CSI China Internet (KWEB) held on to the top spot with a 71.1% gain. Guggenheim China Technology (CQQQ) moved up a notch to second place with a 69.9% return, pushing EMQQ Emerging Markets Internet & Ecommerce (EMQQ) back to third with a 64% advance.
Global X China Consumer (CHIQ) hopped up to fourth from sixth place last month, with VanEck Vectors Brazil Small-Cap (BRF) and iShares MSCI Brazil Small-Cap (EWZS) taking fifth and sixth.
"China's growth acceleration ... helped foster this year's EM (emerging markets) recovery, boosting EM earnings growth and equity outperformance," BlackRock's Turnill said. "China's also coincided with a near perfect setup for EM assets: a weaker U.S. dollar, falling bond yields, rising commodity prices and a more synchronized global expansion."
Looking forward, he expects China's GDP growth to slow slightly next year, but remain at levels that will still likely be beneficial for emerging markets and global equities.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
