Market Overview

2 Defensive ETFs Earn Upgrades

2 Defensive ETFs Earn Upgrades

The S&P 500 is up nearly 30% from its March lows and while that's undoubtedly an impressive run in a short time frame, some investors remain chastened by the coronavirus market meltdown.

A predictable result of those apprehensions is investors looking to remain engaged with equities, but doing so defensive ideas, be it at the sector level or via broad market funds with favorable volatility traits.

“After selling off sharply in March, U.S. equities partially snapped back as investors embraced the reward potential and put aside some of the Covid-19 related risk they had concerns about just weeks earlier,” said CFRA Research Director of ETF & Mutual Fund Research Todd Rosenbluth in a note out Monday.

Rosenbluth upgraded a pair of exchange traded funds with defensive traits. Here's a look at that defensive duo.

Invesco S&P 500 Low Volatility ETF (SPLV)

The Invesco S&P 500 Low Volatility ETF (NYSE: SPLV) did its job in March, performing less poorly than the S&P 500. However, the fund is lagging the broader market on the way back up, but those are the breaks with low volatility ETFs.

“In March, the $9 billion Invesco S&P 500 Low Volatility ETF outperformed the declining broader market, but the fund underperformed during the April recovery,” said Rosenbluth. “This adds to its risk mitigation appeal, according to CFRA’s research.”

The analyst upgraded SPLV to a four-star rating from three stars. Fortunately, the fund's energy exposure is scant, but it's being hamstrung by a combined 31.32% allocation to the real estate and financial services sectors.

SPLV is a collection of the 100 S&P 500 members with the lowest trailing 12-month volatility.

See Also: 3 ETFs For Disney Earnings

John Hancock Multifactor Consumer Staples ETF (JHMS)

Among consumer staples ETFs, the John Hancock Multifactor Consumer Staples ETF (NYSE: JHMS) often goes overlooked, but it's a credible option for investors looking for an alternative to the prosaic cap-weighted funds that dominate this category.

As its name implies, JHMS adheres to multiple factors, those being smaller cap, lower relative price, and higher profitability.

“John Hancock Multifactor Consumer Staples ETF has just $20 million in assets, and now earns a five-star rating from CFRA due to its appealing reward/risk combination and reasonable costs,” said Rosenbluth.

The analyst notes that JHMS is overweight Costco (NASDAQ: COST) — the fund's fourth-largest holding — relative to cap-weighted rivals and its ascension to five-star status is impressive because just a month ago, it was rated three stars.


Related Articles (SPLV + JHMS)

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