Sector ETFs For A Happy Holiday Season
With just a little more than six weeks left in 2014, investors are gearing up to sprinkle some holiday cheer in their portfolios. So far this year, the SPDR S&P 500 ETF Trust (NYSE: SPY) has gained nearly 11 percent after a successful campaign that has included a marked uptick in volatility.
As the final two months of the year close out, stocks are sitting on sound technical and fundamental footing that has the potential to add to current gains. However, choosing the right sector can often provide an additional boost to an investor's total return.
2013 'Big Winner' ETFs
Last year’s big winners in the final two months of the year coincided with traditional growth-oriented areas. The Sector SPDR Trust sbi (NYSE: XLI) gained more than 7 percent in net return during November and December of 2013.
This ETF features 66 large-cap stocks that include large infrastructure, transportation and industrial conglomerates. General Electric Company (NYSE: GE) and Union Pacific Corporation (NYSE: UNP) are the two largest holdings in XLI.
Transportation stocks in particular have benefited from lower energy prices this year and have shown marked strength versus other segments of the market. Lower gas prices directly boost profitability for these companies and offer other competitive advantages as well.
Another high-flying sector was the Consumer Discretionary SPDR (ETF) (NYSE: XLY), which gained more than 6 percent during the same time frame last year. With the ramp up in holiday shopping, the retail and luxury goods manufacturers that make up this ETF are especially primed for a Santa Claus rally.
Walt Disney Co (NYSE: DIS) and Amazon.com, Inc (NASDAQ: AMZN) are two of the top five holdings in this large company index. In addition, XLY is dominated by media names such as Comcast Corporation (NASDAQ: CMCSA).
Despite being in the bottom quartile of sectors so far this year, XLY has the potential to play catch up and break out to new highs as we close out 2014. A strong showing in retail sales on Black Friday along with solid indications of Christmas demand will play a key role in this sector.
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