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Growth ETFs Outshine in 1H: What's in Store for 2H?
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Growth investing has been in vogue this year amid the powerful stock market rally led by the artificial intelligence (AI) boom and optimism over potential interest rate cuts. Growth stocks outperform during an uptrend. Currently, both the S&P 500 and the Nasdaq Composite Index are hitting a series of record highs (read: Spread of Growth ETFs at New All-Time Highs).
Growth investing focuses on capital appreciation rather than annual income or dividends. It is a stock-buying strategy that aims to profit from companies that grow at above-average rates compared with their industry or the market. This is a more active approach compared to value investing to build up one’s portfolio and generate more return on capital investment. However, these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S, and P/E ratios and exhibit a higher degree of volatility, especially compared with value stocks.
Gabelli Growth Innovators ETF (GGRW - Free Report) stole the show in the first half, gaining 33.3%, followed by gains of 27.9% for Hartford Large Cap Growth ETF (HFGO - Free Report) , 27.4% for IQ Winslow Focused Large Cap Growth ETF (IWFG - Free Report) , 27.4% for Fidelity Blue Chip Growth ETF (FBCG - Free Report) and 26.9% for Nuveen Growth Opportunities ETF (NUGO - Free Report) . These funds offer diversified exposure to several growth sectors and are not confined to a particular segment.
Many growth companies reported strong earnings in the first quarter, exceeding analysts' expectations. This strong earnings performance contributed to positive momentum for the stocks, supporting their outperformance.
Gabelli Growth Innovators ETF is an actively managed fund that seeks to invest in companies in secular growth industries whose competitive moats will enable outsized market share gains and whose future stream of cash flows is undervalued at current market prices, according to the portfolio manager. Gabelli Growth Innovators ETF has gathered $5.3 million in its asset base and trades in an average daily volume of 2,000 shares. The product has an expense ratio of 0.90% (read: 5 Large-Cap ETFs at the Forefront of the Market Rally This Year).
Hartford Large Cap Growth ETF is an actively managed ETF with AUM of $130.4 million and an average daily volume of 1,000 shares. It holds 47 stocks in its basket and charges 60 bps in annual fees.
IQ Winslow Focused Large Cap Growth ETF (IWFG - Free Report)
IQ Winslow Focused Large Cap Growth ETF is also actively managed. With AUM of $12 million, it trades in an average daily volume of 1,000 shares and charges 65 bps in fees per year from investors.
Fidelity Blue Chip Growth ETF invests in blue-chip companies (well-known, well-established and well-capitalized), which generally have large or medium market capitalizations. These companies have above-average growth potential (stocks of these companies are often called "growth" stocks). Fidelity Blue Chip Growth ETF holds 206 securities in its basket with AUM of $1.9 billion. It charges 59 bps in annual fees and trades in an average daily volume of 442,000 shares.
Nuveen Growth Opportunities ETF seeks to invest in high-quality companies that exhibit potential for attractive earnings growth, strong relative valuation, attractive cash flows and significant long-term returns. It has amassed $3.2 billion in its asset base and charges 56 bps in annual fees. Nuveen Growth Opportunities ETF trades in 11,000 shares.
Looking Ahead
AI will continue to drive growth in the second half of 2024. The expansion of AI applications holds the promise of ushering in fresh growth opportunities.
The Fed, in its latest meeting, penciled in one rate cut for this year. It foresees four cuts for 2025. The central bank has altered the language in its statement, noting that there has been “modest further progress toward the committee’s 2% inflation objective.” Previously, the statement pointed to a “lack” of further progress (read: Buy 5 Growth ETFs as Fed Stays Put, Eyes Rate Cut).
Low rates are generally favorable for growth stocks as they reduce the cost of borrowing, often needed to finance the expansion of companies. Lower rates typically reduce the attractiveness of fixed-income investments like bonds, leading investors to seek higher returns in the equity markets. Growth stocks, with their potential for high returns, become more appealing to investors in this environment, driving up demand and, consequently, their prices.
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Growth ETFs Outshine in 1H: What's in Store for 2H?
Growth investing has been in vogue this year amid the powerful stock market rally led by the artificial intelligence (AI) boom and optimism over potential interest rate cuts. Growth stocks outperform during an uptrend. Currently, both the S&P 500 and the Nasdaq Composite Index are hitting a series of record highs (read: Spread of Growth ETFs at New All-Time Highs).
Growth investing focuses on capital appreciation rather than annual income or dividends. It is a stock-buying strategy that aims to profit from companies that grow at above-average rates compared with their industry or the market. This is a more active approach compared to value investing to build up one’s portfolio and generate more return on capital investment. However, these funds offer exposure to stocks with growth characteristics that have comparatively higher P/B, P/S, and P/E ratios and exhibit a higher degree of volatility, especially compared with value stocks.
Gabelli Growth Innovators ETF (GGRW - Free Report) stole the show in the first half, gaining 33.3%, followed by gains of 27.9% for Hartford Large Cap Growth ETF (HFGO - Free Report) , 27.4% for IQ Winslow Focused Large Cap Growth ETF (IWFG - Free Report) , 27.4% for Fidelity Blue Chip Growth ETF (FBCG - Free Report) and 26.9% for Nuveen Growth Opportunities ETF (NUGO - Free Report) . These funds offer diversified exposure to several growth sectors and are not confined to a particular segment.
Many growth companies reported strong earnings in the first quarter, exceeding analysts' expectations. This strong earnings performance contributed to positive momentum for the stocks, supporting their outperformance.
ETFs in Focus
Gabelli Growth Innovators ETF (GGRW - Free Report)
Gabelli Growth Innovators ETF is an actively managed fund that seeks to invest in companies in secular growth industries whose competitive moats will enable outsized market share gains and whose future stream of cash flows is undervalued at current market prices, according to the portfolio manager. Gabelli Growth Innovators ETF has gathered $5.3 million in its asset base and trades in an average daily volume of 2,000 shares. The product has an expense ratio of 0.90% (read: 5 Large-Cap ETFs at the Forefront of the Market Rally This Year).
Hartford Large Cap Growth ETF (HFGO - Free Report)
Hartford Large Cap Growth ETF is an actively managed ETF with AUM of $130.4 million and an average daily volume of 1,000 shares. It holds 47 stocks in its basket and charges 60 bps in annual fees.
IQ Winslow Focused Large Cap Growth ETF (IWFG - Free Report)
IQ Winslow Focused Large Cap Growth ETF is also actively managed. With AUM of $12 million, it trades in an average daily volume of 1,000 shares and charges 65 bps in fees per year from investors.
Fidelity Blue Chip Growth ETF (FBCG - Free Report)
Fidelity Blue Chip Growth ETF invests in blue-chip companies (well-known, well-established and well-capitalized), which generally have large or medium market capitalizations. These companies have above-average growth potential (stocks of these companies are often called "growth" stocks). Fidelity Blue Chip Growth ETF holds 206 securities in its basket with AUM of $1.9 billion. It charges 59 bps in annual fees and trades in an average daily volume of 442,000 shares.
Nuveen Growth Opportunities ETF (NUGO - Free Report)
Nuveen Growth Opportunities ETF seeks to invest in high-quality companies that exhibit potential for attractive earnings growth, strong relative valuation, attractive cash flows and significant long-term returns. It has amassed $3.2 billion in its asset base and charges 56 bps in annual fees. Nuveen Growth Opportunities ETF trades in 11,000 shares.
Looking Ahead
AI will continue to drive growth in the second half of 2024. The expansion of AI applications holds the promise of ushering in fresh growth opportunities.
The Fed, in its latest meeting, penciled in one rate cut for this year. It foresees four cuts for 2025. The central bank has altered the language in its statement, noting that there has been “modest further progress toward the committee’s 2% inflation objective.” Previously, the statement pointed to a “lack” of further progress (read: Buy 5 Growth ETFs as Fed Stays Put, Eyes Rate Cut).
Low rates are generally favorable for growth stocks as they reduce the cost of borrowing, often needed to finance the expansion of companies. Lower rates typically reduce the attractiveness of fixed-income investments like bonds, leading investors to seek higher returns in the equity markets. Growth stocks, with their potential for high returns, become more appealing to investors in this environment, driving up demand and, consequently, their prices.