As the U.S. hits the 8th anniversary of the ongoing equity bull market, some of the top performing exchange traded funds include those with a value focus, internet exposure and targeted insurance sector tilt.
Friday, March 10 marks the 8th anniversary of the second longest bull market in U.S. history. Over the eight years, an estimated $21 trillion has been accumulated in stock market wealth over the record bull run.
Over the period, value plays have been among the best performers. Specifically, the Guggenheim S&P 500 Pure Value ETF (NYSEArca: RPV) has generated an average annualized return of 29.2% and the Guggenheim S&P Smallcap 600 Pure Value ETF (NYSEArca: RZV) returned an average 28.4% over the past eight years, according to Morningstar data.
While the value style has experienced its ups and downs over the years, especially with growth taking the limelight during the bull run, the outperformance in value over the long haul is not that surprising.
Value stocks have historically outperformed growth stocks, or companies with high earnings expectations, in almost every market over longer periods. In their attempts to better measure market returns, Eugene Fama and Kenneth French, both professors at the University of Chicago Booth School of Business, have found that value outperformed growth stocks and small-caps tend to outperform large-caps over the long-term as outlined in their Fama-French Three-Factor Model.
The only surprise this time around is that the small-cap category was outpaced by the large-cap category since March 10, 2009.
Additionally, the internet company-related PowerShares NASDAQ Internet Portfolio (NasdaqGM: PNQI) and First Trust Dow Jones Internet Index Fund (NYSEArca: FDN) topped the list, returning an average annualized 28.1% and 27.0%, respectively, over the eight-year period. PNQI and FDN provide exposure to the growth style of the increasingly important internet segment, especially the quickly growing e-commerce or online consumer discretionary segment.
Specifically, PNQI tracks the largest and most liquid U.S. companies engaged in internet-related businesses, which includes 56.1% internet software & services and 39.5% internet & direct marketing retail. Consequently, you end up with big internet names like Netflix (NasdaqGS: NFLX) and Facebook (NasdaqGS: FB), but investors are also exposed to online retail giants like Amazon (NasaqGS: AMZN).
Similarly, FDN also provides access to this same group, except it has a larger 70.1% tilt toward information technology companies and 21.0% to consumer discretionary. Nevertheless, it’s top holdings also include NFLX, FB and AMZN.
Lastly, the SPDR S&P Insurance ETF (NYSEArca: KIE) also topped the list of best performers, returning an average annualized return of 27.2% since 2009.
Many many think of KIE as an outstanding play, but the insurance ETF has been enjoying a streak of record runs, especially in recent months, with a notable spike after President Donald Trump’s election day win.
The financial industry has largely benefited from the increasingly expansionary outlook, especially with many anticipating a Federal Reserve rate hike to keep the economy from overheating. Insurance ETFs, sensitive to Treasury yield gyrations in their own regard, are often responsive to rising bond yields. Among industry ETFs that respond positively to rising Treasury yields, perhaps only regional bank funds have been more desperate for rising rates than insurance ETFs.