Market Overview

Top 10 Industrial Sector ETFs

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With market trends by and large well-correlated within S&P 500 sectors we view each sector separately. Currently all markets are battling a global economic contraction occasioned by eurozone debt and fiscal issues (again). This issue has put most of the 17 members in the EMU in or near recession. China has also seen their economy slow which is a major importer of goods and materials from emerging market countries. The U.S. is not alone in feeling the impact from all this and is still plodding along with slow growth, high unemployment and home prices still weak.

The industrial sector feels the pressure from all these issues clearly.

We offer general guidance that average investors can utilize without too much trading and is reasonably effective. We do this by using a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short.

Premium members to the ETF Digest receive added signals when markets become extended such as DeMark indicators trigger an exit from overbought/oversold conditions. 

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

ETFs are based on indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, Dow Jones and so forth. Also included are some so-called “enhanced” indexes that attempt to achieve better performance through more active management of the index.

Where competitive issues exist and/or repetitive issues available at a fee cost saving we mention those as other choices. New issues are coming to market consistently (especially globally) and sometimes these issues will need to become more seasoned before they may be included at least in our listings.

#10. iShares S&P Global Industrials ETF (NYSE: EXI)  

EXI follows the S&P Global Industrials Index which covers the mostly developed market constituents in the U.S. and overseas. The fund was launched in September 2006. The expense ratio is 0.48%. AUM equal $174M with average daily trading volume of 17K shares. As of May 2012 the annual dividend yield was 2.37% and YTD return 1.87%. The 1 YR return was -12.15%.

An alternative choice could be SPDR S&P International Industrial Sector ETF (NYSE: IPN) which follows the S&P Developed Ex-U.S. BMI Industrial Sector Index. It was launched in July 2008. The expense ratio is 0.50%. AUM equal only $11.3M and average daily trading volume is low at 12K shares.

Data as of May 2012

EXI Top Ten Holdings & Weightings

  •    General Electric Co (GE): 8.04%

  •    Siemens AG (SIE): 3.31%

  •    United Technologies Corp (UTX): 2.88%

  •    United Parcel Service Inc (UPS) (UPS): 2.85%

  •    Caterpillar Inc (CAT): 2.60%

  •    3M Co (MMM): 2.41%

  •    Boeing Co (BA): 2.23%

  •    Union Pacific Corp (UNP): 2.06%

  •    Honeywell International, Inc. (HON): 1.84%

  •    ABB, Ltd. (ABBN): 1.65%

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#9. iShares Dow Jones U.S. Aerospace & Defense ETF (NYSE: ITA

ITA follows the Dow Jones U.S. Select Aerospace & Defense Index which measures this sector of the U.S. equity market. The fund was launched in May 2006. The expense ratio is 0.48%. AUM equal $97M and average daily trading volume is over 10K shares. As of May 2012 the annual dividend was 0.88% and YTD return around 1.60%. The 1 YR return was 1.60%.

Data as of May 2012

ITA Top Ten Holdings & Weightings

  •    United Technologies Corp (UTX): 9.44%

  •    Boeing Co (BA): 8.67%

  •    Precision Castparts Corp. (PCP): 6.39%

  •    Lockheed Martin Corporation (LMT): 6.11%

  •    Raytheon Company (RTN): 5.54%

  •    General Dynamics (GD): 5.42%

  •    Northrop Grumman Corp (NOC): 5.02%

  •    Goodrich Corporation (GR): 4.93%

  •    L-3 Communications Holdings Inc (LLL): 3.61%

  •    Rockwell Collins, Inc. (COL): 3.58%

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#8. PowerShares Aerospace & Defense ETF (NYSE: PPA 

PPA follows the SPADE Defense Index which also includes homeland security and the usual aerospace and defense constituents. The fund was launched in October 2005. The expense ratio is 0.60%. AUM equal roughly $50M and average daily trading volume is over 13K shares As of May 2012 the annual dividend yield was 1.03% and YTD return 1.91%. The 1 YR return was -7.69%.

This sector is narrower than the broader features of XLI for example.

Data as of May 2012

PPA Top Ten Holdings & Weightings

  •    United Technologies Corp (UTX): 5.73%

  •    Honeywell International, Inc. (HON): 5.72%

  •    Boeing Co (BA): 5.71%

  •    Lockheed Martin Corporation (LMT): 5.15%

  •    General Dynamics (GD): 4.65%

  •    Goodrich Corporation (GR): 4.53%

  •    Northrop Grumman Corp (NOC): 4.51%

  •    Raytheon Company (RTN): 4.50%

  •    Precision Castparts Corp. (PCP): 4.46%  

  •    Textron Inc (TXT): 4.02%



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#7. PowerShares Dynamic Industrials ETF (NYSE: PRN

PRN follows the Dynamic Industrials Sector Intellidex Index. This is another of the “enhanced” indexes which uses the same constituents as other passive indexes utilize but then applies proprietary quantitative analysis to assemble and more actively manage the index. The fund was launched in October 2006. The expense ratio is 0.60%. AUM equal $27M and average daily trading volume is 4K shares. As of May 2012 the annual dividend yield was 0.28% and YTD return 3.47%. The 1 YR return was -9.40%. 

Enhanced indexes may outperform on the upside but may underperform as markets retreat.

Data as of May 2012

PRN Top Ten Holdings & Weightings

  •    Tyco International Ltd (TYC): 2.73%

  •    United Parcel Service Inc (UPS) (UPS): 2.62%

  •    United Continental Holdings Inc (UAL): 2.62%

  •    Delta Air Lines Inc (DAL): 2.59%

  •    W.W. Grainger, Inc. (GWW): 2.58%

  •    Northrop Grumman Corp (NOC): 2.54%

  •    FedEx Corporation (FDX): 2.53%

  •    L-3 Communications Holdings Inc (LLL): 2.50%

  •    Textron Inc (TXT): 2.50%

  •    Lockheed Martin Corporation (LMT): 2.50%

 

 

PRN

 


#6. First Trust Industrials AlphaDEX ETF (NYSE: FXR) 

FXR follow the StrataQuant Industrials Index which, like PRN, is another “enhanced” index applying proprietary quantitative analysis applications to the basic sector. The fund was launched in May 2007. The expense ratio is .70%. AUM equal nearly $64.4 million while average daily trading volume is 40K shares. As of early February 2012 the annual dividend yield was .58% and YTD return 10.60%. The one year return was -1.17%.

Once again just comparing the rates of return you can see the more volatile performance for both FXR and PRN versus conventional index linked ETFs. The makes trading issues more significant.

Data as of May 2011

FXR Top Ten Holdings & Weightings

  •    Exelis Inc (XLS): 2.05%

  •    Thomas & Betts Corporation (TNB): 1.95%

  •    Wesco International, Inc. (WCC): 1.83%

  •    ITT Corp (ITT): 1.76%

  •    Lincoln Elec

The preceding article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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