The ALPS Sector Dividend Dogs ETF (SDOG) outperformed the S&P 500 Index by over 100 basis points last week.
SDOG’s outperformance came as the mega-cap “tech wreck” gained momentum following several earnings misses and lowered fiscal year guidance, ALPS wrote in an October 31 insight. SDOG notably does not own any of FAANGMAT stocks.
The fund’s relative underweight to the information technology sector and overweight to the cyclical energy and materials sectors have furthered its two-year, one-year, and year-to-date outperformance over the S&P 500, tracked by the SPDR S&P 500 ETF Trust (SPY).
SDOG is a deep-value portfolio of high-yielding large-cap stocks, which continues to be in favor with investors as inflation remains elevated, resulting in cyclical sectors with pricing power maintaining their leadership.
“Year-to-date, we have witnessed a destructive tech selloff, with FAANGMAT names (Facebook/Meta, Apple, Amazon, Nvidia, Google, Microsoft, Alphabet, and Tesla) losing over $4 trillion in market value YTD,” ALPS wrote. “Deep value, cyclical stocks have continued to perform well amid a high inflationary environment, with many of these names benefiting from higher pricing power and easier year-over-year comparisons that have resulted in strong earnings and sales growth.”
The FAANGMAT names notably have an outsized impact on the S&P 500, currently making up 22.30% of the S&P 500 Index constituents, and have contributed to over 50% of the index’s -1,710bps year-to-date decline. Big Tech names such as Amazon, Microsoft, and Meta have all reduced their fiscal year guidance recently, with many other growth stocks also showing signs of macro weakness.
Last week, SDOG’s defensive sectors mostly led performance with its healthcare sector as the best performer. Biopharmaceutical company, Gilead Sciences Inc. (GILD, 2.48% weight as of October 28), gained nearly 17% last week on the back of a Q3 earnings beat with the company nearly doubling its cancer drugs sales and seeing a reacceleration in its HIV franchise, ALPS wrote.
Biotech manufacturer, Amgen Inc. (AMGN, 2.26% weight as of October 28), also rose 8.68% last week in SDOG’s healthcare sector, following positive analyst commentary regarding potentially better-than-expected sales for its key drugs. Amgen has also been boosted by the recent buzz around their acquisition of ChemoCentryx Inc, ALPS wrote.
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