5 Top-Ranked Mega-Cap ETFs Scaling New Highs
We have highlighted some mega-cap ETFs that hit new peak in the latest trading session and will continue to outperform given that these products have...
Wall Street has been hitting a series of new highs lately powered by the vaccination drive, solid corporate earnings and the latest Fed dovish comments.
This is especially true as the first full U.S. approval of a COVID-19 vaccine by Pfizer PFE and BioNTech has renewed optimism over economic growth, bolstering risk-on trade. The move will help quash the ongoing surge in the COVID-19 Delta variant and lead to the continued reopening of the economy. Meanwhile, the Q2 earnings picture is very strong, with broad-based strength across all major sectors and the overall quarterly total on track to reach a new all-time record (read: 5 Must-Watch ETF Charts of Q2 Earnings).
Chairman Jerome Powell in the Jackson Hole conference last week stated that the central bank is in no hurry to raise interest rates though it will gradually begin tapering $120 billion in monthly bond purchases by the end of the year.
The combination of factors has made bulls powerful and will help them to roar higher. The U.S. economy also returned to the pre-pandemic level with the GDP rising 6.6% annually in the second quarter, indicating a sustained recovery from the pandemic recession. Rapid vaccinations, reopening of businesses and trillions of dollars of government stimulus spending will continue to power consumer spending resulting in robust growth.
While the rally has been broad-based, the mega-cap corner is also shining, especially after the Fed view pushed the U.S. dollar down against the basket of currencies. The dollar index dipped 0.4% over the past week and is expected to remain weak. A weak dollar bodes well for blue-chip companies, which derive the majority of revenues from international markets. This is because they made dollar-denominated assets cheap for foreign investors, making U.S. multinationals more competitive, thereby reaping higher profits. As such, companies with a greater percentage of international sales will likely outperform.
Further, the blue-chip index has an attractive valuation compared to the other major indices. The benchmark has a P/E ratio to forward 12 months of 24.06 compared to that of 31.26 for the S&P 500 and 36.10 for the Nasdaq 100 Index (see: all the Large Cap ETFs here).
In lieu of the above discussion, we have highlighted some mega-cap ETFs that hit new peak in the latest trading session and will continue to outperform given that these products have a Zacks ETF Rank #2 (Buy):
iShares S&P 100 ETF OEF
This ETF follows the S&P 100 Index, charging investors 20 bps in annual fees. It holds 101 stocks in its basket and has AUM of $8.2 billion. The product trades in an average daily volume of 186,000 shares.
Invesco S&P 500 Top 50 ETF XLG
This fund follows the S&P 500 Top 50 Index, which measures the cap-weighted performance of 50 of the largest companies on the S&P 500 Index, reflecting the performance of U.S. mega-cap stocks. It has been able to manage assets worth $2.1 billion and trades in a small volume of about 35,000 shares a day on average. The expense ratio comes in at 0.20%.
Vanguard Mega Cap Growth ETF MGK
With AUM of $12.4 billion, this ETF offers diversified exposure to 114 largest growth stocks in the U.S. market by tracking the CRSP US Mega Cap Growth Index. It charges 7 bps in annual fees and trades in a good volume of around 198,000 shares a day on average. The fund has a Zacks ETF Rank #2 (read: Mega-Cap Growth ETF Hits New 52-Week High).
Vanguard Mega Cap ETF MGC
With AUM of $4.2 billion, this ETF tracks the CRSP US Mega Cap Index. It charges 7 bps in annual fees but trades in a moderate average daily volume of 72,000 shares. The product has a Zacks ETF Rank #2.
iShares Russell Top 200 Growth ETF IWY
This fund offers exposure to large-capitalization U.S. equities that exhibit growth characteristics by tracking the Russell Top 200 Growth Index. It holds 109 stocks in its basket with AUM of $4.2 billion and expense ratio of 0.20%. The ETF trades in an average daily volume of 123,000 shares.
Investors should note that the blue-chip index has not hit new highs lately but these ETFs are, suggesting their strong momentum.
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Invesco S&P 500 Top 50 ETF (XLG): ETF Research Reports
iShares Russell Top 200 Growth ETF (IWY): ETF Research Reports
Vanguard Mega Cap Growth ETF (MGK): ETF Research Reports
Vanguard Mega Cap ETF (MGC): ETF Research Reports
iShares S&P 100 ETF (OEF): ETF Research Reports
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