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5 Best Top-Ranked ETFs of August With Room for More Upside
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Wall Street wrapped up August on a positive note after a turbulent start due to the tech sell-off. The Dow Jones touched a series of record highs, gaining 1.8%, while the S&P 500 marked its fourth straight winning month, rising 2.3%. The tech-heavy Nasdaq Composite Index logged 0.7% growth despite investors losing faith in the technology sector.
Given this, investors should bet on ETFs that were winners in August and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting outperformance in the coming weeks. These are iShares U.S. Insurance ETF (IAK - Free Report) , iShares U.S. Medical Devices ETF (IHI - Free Report) , Invesco DWA Technology Momentum ETF (PTF - Free Report) , Invesco Aerospace & Defense ETF (PPA - Free Report) , and iShares MSCI USA Quality Factor ETF (QUAL - Free Report) .
While recession fears keep investors on edge early in the month, a likely rate cut in September is likely to fuel optimism in the stock market in the latter part. Cyclical sectors, which are poised to benefit from rate cuts, and defensive sectors, such as consumer staples, real estate and healthcare, lifted the broad market index (read: 5 Quality ETFs to Bet on Amid Volatile Markets).
A similar trend is expected to continue in the coming weeks, given the pending Fed decision to cut rates this month and the upcoming presidential election in November. The rate-cut decision will drive investors toward cyclical sectors, while volatility will raise the appeal for defensive ones. Federal Reserve Chair Jerome Powell signaled that interest rate cuts are coming in September, citing easing inflation and a weakening job market.
Lower rates generally lead to reduced borrowing costs for mortgages, credit cards and other consumer and business loans. These help businesses expand their operations more easily, resulting in increased profitability. This, in turn, stimulates economic growth and boosts the stock market.
We have profiled the abovementioned ETFs in detail below:
iShares U.S. Insurance ETF (IAK - Free Report) – Up 7.5%
With AUM of $683.4 million, iShares U.S. Insurance ETF offers exposure to U.S. companies that provide life, property and casualty, and full-line insurance. It tracks the Dow Jones U.S. Select Insurance Index and holds 52 securities in its basket with a double-digit concentration on the top two firms. Property & casualty insurance accounts for the largest share at 72.8%, while life & health insurance rounds off the next spot with double-digit exposure.
iShares U.S. Medical Devices ETF (IHI - Free Report) – Up 7.5%
iShares U.S. Medical Devices ETF provides exposure to U.S. companies that manufacture and distribute medical devices by tracking the Dow Jones U.S. Select Medical Equipment Index. In total, the fund holds 50 securities in its basket, with a heavy concentration on the top three firms.
iShares U.S. Medical Devices ETF has AUM of $5 billion and charges 40 bps in fees per year. It has a Zacks ETF Rank #2.
Invesco DWA Technology Momentum ETF (PTF - Free Report) – Up 6.2%
Invesco DWA Technology Momentum ETF offers exposure to 35 tech companies that are showing relative strength (momentum) by tracking the Dorsey Wright Technology Technical Leaders Index. Semiconductor & Equipment takes the largest share at 38.3%, followed by software (31%) and diversified telecom services (10%) (read: 5 Technology ETFs at the Forefront of the August Rebound).
Invesco DWA Technology Momentum ETF is relatively illiquid and unpopular, with AUM of $438.7 million. It charges 60 bps in annual fees and has a Zacks ETF Rank #1 with a High risk outlook.
Invesco Aerospace & Defense ETF offers exposure to 55 companies involved in the development, manufacturing, and operations, as well as provides support to U.S. defense, homeland security and aerospace. It tracks the SPADE Defense Index, charging 58 bps in annual fees from investors.
Invesco Aerospace & Defense ETF has so far managed assets of $3.8 billion and has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares MSCI USA Quality Factor ETF (QUAL - Free Report) - Up 5%
With an AUM of $48.8 billion, iShares MSCI USA Quality Factor ETF provides exposure to large and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index.
QUAL holds 124 stocks in its basket and charges 15 bps in annual fees. It has a Zacks ETF Rank #2 with a Medium risk outlook.
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5 Best Top-Ranked ETFs of August With Room for More Upside
Wall Street wrapped up August on a positive note after a turbulent start due to the tech sell-off. The Dow Jones touched a series of record highs, gaining 1.8%, while the S&P 500 marked its fourth straight winning month, rising 2.3%. The tech-heavy Nasdaq Composite Index logged 0.7% growth despite investors losing faith in the technology sector.
Given this, investors should bet on ETFs that were winners in August and have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting outperformance in the coming weeks. These are iShares U.S. Insurance ETF (IAK - Free Report) , iShares U.S. Medical Devices ETF (IHI - Free Report) , Invesco DWA Technology Momentum ETF (PTF - Free Report) , Invesco Aerospace & Defense ETF (PPA - Free Report) , and iShares MSCI USA Quality Factor ETF (QUAL - Free Report) .
While recession fears keep investors on edge early in the month, a likely rate cut in September is likely to fuel optimism in the stock market in the latter part. Cyclical sectors, which are poised to benefit from rate cuts, and defensive sectors, such as consumer staples, real estate and healthcare, lifted the broad market index (read: 5 Quality ETFs to Bet on Amid Volatile Markets).
A similar trend is expected to continue in the coming weeks, given the pending Fed decision to cut rates this month and the upcoming presidential election in November. The rate-cut decision will drive investors toward cyclical sectors, while volatility will raise the appeal for defensive ones. Federal Reserve Chair Jerome Powell signaled that interest rate cuts are coming in September, citing easing inflation and a weakening job market.
Lower rates generally lead to reduced borrowing costs for mortgages, credit cards and other consumer and business loans. These help businesses expand their operations more easily, resulting in increased profitability. This, in turn, stimulates economic growth and boosts the stock market.
We have profiled the abovementioned ETFs in detail below:
iShares U.S. Insurance ETF (IAK - Free Report) – Up 7.5%
With AUM of $683.4 million, iShares U.S. Insurance ETF offers exposure to U.S. companies that provide life, property and casualty, and full-line insurance. It tracks the Dow Jones U.S. Select Insurance Index and holds 52 securities in its basket with a double-digit concentration on the top two firms. Property & casualty insurance accounts for the largest share at 72.8%, while life & health insurance rounds off the next spot with double-digit exposure.
iShares U.S. Insurance ETF charges 39 bps in annual fees and has a Zacks ETF Rank #2 with a Medium risk outlook (read: ETF Winners of Q2 Earnings: 4 Must-See Charts).
iShares U.S. Medical Devices ETF (IHI - Free Report) – Up 7.5%
iShares U.S. Medical Devices ETF provides exposure to U.S. companies that manufacture and distribute medical devices by tracking the Dow Jones U.S. Select Medical Equipment Index. In total, the fund holds 50 securities in its basket, with a heavy concentration on the top three firms.
iShares U.S. Medical Devices ETF has AUM of $5 billion and charges 40 bps in fees per year. It has a Zacks ETF Rank #2.
Invesco DWA Technology Momentum ETF (PTF - Free Report) – Up 6.2%
Invesco DWA Technology Momentum ETF offers exposure to 35 tech companies that are showing relative strength (momentum) by tracking the Dorsey Wright Technology Technical Leaders Index. Semiconductor & Equipment takes the largest share at 38.3%, followed by software (31%) and diversified telecom services (10%) (read: 5 Technology ETFs at the Forefront of the August Rebound).
Invesco DWA Technology Momentum ETF is relatively illiquid and unpopular, with AUM of $438.7 million. It charges 60 bps in annual fees and has a Zacks ETF Rank #1 with a High risk outlook.
Invesco Aerospace & Defense ETF (PPA - Free Report) – Up 5.6%
Invesco Aerospace & Defense ETF offers exposure to 55 companies involved in the development, manufacturing, and operations, as well as provides support to U.S. defense, homeland security and aerospace. It tracks the SPADE Defense Index, charging 58 bps in annual fees from investors.
Invesco Aerospace & Defense ETF has so far managed assets of $3.8 billion and has a Zacks ETF Rank #2 with a Medium risk outlook.
iShares MSCI USA Quality Factor ETF (QUAL - Free Report) - Up 5%
With an AUM of $48.8 billion, iShares MSCI USA Quality Factor ETF provides exposure to large and mid-cap stocks exhibiting positive fundamentals (high return on equity, stable year-over-year earnings growth and low financial leverage) by tracking the MSCI USA Sector Neutral Quality Index.
QUAL holds 124 stocks in its basket and charges 15 bps in annual fees. It has a Zacks ETF Rank #2 with a Medium risk outlook.