Material Men: Materials ETFs Beating Broader Market

The cautionary tale with the materials sector is expected earnings growth or lack thereof. “The Materials sector has witnessed the largest dip in expected earnings growth (to -2.1% from 8.7%) since the start of the quarter. Companies in the Metals & Mining industry have seen major reductions to EPS estimates during this time,” according to FactSet data.

In the six years ending 2013, XLB only outperformed the S&P 500 twice – in 2009 and 2010. At the fundamental level, materials stocks are a tad pricy compared to the S&P 500. On a relative basis, the materials sector is trading above its long-term price-to-earnings, price-to-book and price-to-operating cash flow ratios.

Materials Select Sector