Market Overview

Two Boring ETFs for All Investors (XLB, XLI)

When the stock market is hitting fresh all-time highs and investors are clamoring for the next big thing the slow and steady are often overlooked.

Think of the story of the tortoise and the hare. There are two tortoise ETFs that have been moving along in a smooth uptrend that investors have been ignoring.

SPDR Select Sector Industrials ETF (NYSE: XLI)

A basket of 65 stocks that cover a wide variety of sectors and provides investors with instant diversification. The ETF is most heavily weighted in the aerospace & defense (26 percent), machinery (19 percent), industrial conglomerates (18 percent), and road & rail (9 percent).

The top stocks are the who’s who of industry with General Electric (NYSE: GE), United Technologies (NYSE: UTX), and Boeing (NYSE: BA) the largest holdings.

The ETF has managed to beat the overall market in 2013 with a gain of 23 percent. A recent pullback brought the ETF back to support before it has been able to restart the uptrend. The chart is a perfect example of an uptrend with a series of higher highs and higher lows.

The absence of large moves in either direction may put the ETF in the “boring” category, however it is tough to argue with the gains and the fact it hit an all-time high last month.

SPDR Select Sector Materials ETF (NYSE: XLB)

The materials stocks have not had as good of a 2013 as the industrials and the chart is not as impressive, however the sector should not be ignored. XLB is an example of an ETF that is often mis-perceived due to its name. When investors think materials the first thought is of industrials metals or miners. When in reality the majority of the stocks in the ETF are chemical companies.

The ETF is made up of 33 stocks with 74 percent in the chemicals sector, 15 percent in metals & mining, and 6 percent in paper & forest products. The top four holdings are all chemical stocks that make up 37 percent of the entire ETF. They are Monsanto (NYSE: MON), E.I. du Pont de Nemours (NYSE: DD), Dow Chemical (NYSE: DOW), and Praxair (NYSE: PX).

The ETF is lagging the market with a gain of 13 percent this year, but a recent bounce off price support has the ETF poised to retest the all-time high set in 2008.

We all know who won the race between the tortoise and the hare and many times when it comes to investing the hare prevails. Do not ignore the two ETFs above longer.

Posted-In: Sector ETFs Trading Ideas ETFs Best of Benzinga

 

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