Forgive the generalization, but it is not a stretch to say that many investors with Internet access, a television and those not living in caves are by now well aware of the startling retrenchment in momentum stocks.
The most egregious offenders in the momentum repudiation trade are biotechnology, Internet and social media stocks. The irst Trust Dow Jones Internet Index Fund (NYSEArca: FDN) is lower by more than 12% since the end of February while the Global X Social Media Index ETF (NasdaqGM: SOCL) is now down 17% since Feb. 28. Entering Thursday’s session, the BEST of the five biotech ETFs since the end of February has been the First Trust NYSE Arca Biotechnology Index Fund (NYSEArca: FBT) with a loss in excess of 8%. [A Possible Bounce for Internet ETFs]
“And particular pockets of the market – like last year’s growth stocks–are verging, or have already tipped into, bubble territory. The average price-to-book ratio for the Nasdaq Biotechnology Index is more than 7. As for Internet stocks, we are back to a world reminiscent of the late 1990s, where only the most creative metrics can justify the premiums being paid for certain companies.” says BlackRock Global Chief Investment Strategist Russ Koesterich.
With those factoids in mind, Thursday’s list of ETFs hitting new 52-week highs, albeit short, is instructive regarding how investors feel about the current state of U.S. equities. Just 15 equity-based ETFs have touched new 52-week highs today, few of which can be considered exotic.
A third of the group is comprised of utilities ETFs. The Utilities Select Sector SPDR (NYSEArca: XLU), Vanguard Utilities ETF (NYSEArca: VPU) and the iShares U.S. Utilities ETF (NYSEArca: IDU) are all in the new 52-week high club. So is the Fidelity MSCI Utilities Index ETF (NYSEArca: FUTY), the newest member of the cap-weighted utilities ETF group. The First Trust Utilities AlphaDEX Fund (NYSEArca: FXU), a smart beta spin on utilities, hit a new high as well earlier Thursday. [Smart Beta Play for Utilities Exposure]
Today’s better-by-comparison price action in utilities stocks is not new. XLU is up 12% year-to-date, by far the best performance of the nine sector SPDR ETFs.
Adding to the risk-off sentiment, the Consumer Staples Select Sector SPDR (NYSEArca: XLP), although it is trading slightly lower at this writing, hit a new 52-week high earlier Thursday.
The three dividend ETFs that hit new highs today also pain the picture of investors’ preference for low beta sectors. The $3.4 billion iShares High Dividend ETF (NYSEArca: HDV) is one member of that trio. With a trailing 12-month yield 3.16%, HDV allocates about 52% of its combined weight to staples, utilities and telecom names. Half of the ETF’s top-18 holdings hail from those sectors.
The First Trust Morningstar Dividend Leaders Index Fund (NYSEArca: FDL) enters the 52-week high club despite a less than 3% weight to staples. For the conservative investor, that is alright because over 48% of the ETF’s combined weight goes to utilities and telecom names. FDL has a 12-month distribution rate of 3.1%. [Dialing for a Dividend ETF]
The Global X SuperDividend U.S. ETF (NYSEArca: DIV), the final member of the trio, allocates 42% of its combined weight to the utilities, telecom and staples sector. Up more than 6% this year, DIV has a trailing 12-month yield of 5.8% and pays a monthly dividend.
Global X SuperDividend U.S. ETF
