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4 Sectors Set to Surge in November: ETFs & Stocks to Buy

Sweta Killa

Wall Street climbed to a record high in recent session and the trend is likely to continue this month given solid momentum and a historical outperformance. A better-than-expected earnings season, easing policies, renewed trade deal optimism and a solid jobs report are boosting investors’ sentiment. Notably, the S&P 500 is heading for its best performance since 2013, having gained more than 20% this year (read: S&P 500 at Record High: 6 ETF Winners of Last Week).

If history is any guide, the major bourses are set to hit a new record in November. This is because November has been among the best months for markets over the past decade. According to a CNBC analysis of Kensho, all the three major indices have traded positively 80% of the time in November since 2009. On average, the S&P 500 gained 1.8%, while the Nasdaq was up more than 1.6% and the Dow Jones Industrial Average rose 2%. Per CFRA, November is the third-best month for the S&P 500, with 1.3% gain, on average, two-third of the time since World War II.

November marks the start of the best six months for the Dow Jones and the S&P 500, and the best eight-month period for the Nasdaq, according to Almanac, citing “fourth-quarter cash inflows from institutions.” Additionally, November has been the third-best month for the Dow since 1950 and the Nasdaq since 1971. The month has also been the second best for the S&P 500 for nearly 70 years and the small-capitalization Russell 2000 Index since 1979.

Moreover, seasonality plays a vital role in the stock market surge during the six-month period from November to April. Cyclical stocks from consumer discretionary, industrials, financials, and technology tend to benefit the most. Per a CNBC analysis of Kensho, industrials, consumer discretionary and materials gained 3.33%, 3.13% and 2.71%, respectively, on average, over the past decade. This is especially true as investors look for more growth rather than being defensive when cyclical trading starts. This suggests that investors should buy stocks during this bustling time in the market.

As a result, we have highlighted one ETF and stock from each of the four sectors that could make a great play for investors. All these ETFs and stocks have a top Zacks Rank #1 (Strong Buy) or #2 (Buy). For the stocks, we have used a Growth Score of A, a top-ranked Zacks industry (top 45%), and an estimated double-digit earnings growth for the current year (see: all the Top Ranked ETFs).

Industrials

Industrial Select Sector SPDR XLI: This is the most popular ETF in the industrial space with AUM of $10.2 billion and average daily volume of around 10.7 million shares. The fund follows the Industrial Select Sector Index, holding 69 stocks in its basket with each accounting for less than 7.8% of the assets. About one-fourth of the assets is allocated to aerospace & defense while machinery, industrial conglomerates, and road & rail make up for double-digit share each. This ETF charges 13 bps in fees per year and has a Zacks ETF Rank #1 with a Medium risk outlook (read: 10 Top-Ranked ETFs Beating S&P 500 This Year).

Cintas Corporation CTAS: Based in Cincinnati, OH, Cintas Corporation provides specialized services to businesses of all types throughout North America. The company has an estimated earnings growth rate of 12.76% for fiscal year (ending May 2020). The stock has a Zacks Rank #2.

Consumer Discretionary

Vanguard Consumer Discretionary ETF VCR: This fund follows the MSCI US Investable Market Consumer Discretionary 25/50 Index and holds 298 stocks in its basket with heavy concentration on Amazon (AMZN) at 20.9%. Internet & direct marketing retail is the top sector with more than one-fourth of the portfolio while restaurants and home improvement retail account for the next two spots with double-digit exposure each. VCR charges investors 10 bps in annual fees while volume is moderate at nearly 67,000 shares a day. The product manages an asset base of about $3 billion and has a Zacks ETF Rank #2 with a Medium risk outlook.

Sleep Number Corporation SNBR: Based in Minneapolis, MN, Sleep Number provides sleep solutions and services in the United States. It designs, manufactures, markets, retails, and services beds, bases, and bedding accessories under the Sleep Number name. The stock has an estimated earnings growth rate of 36.46% for this year and carries a Zacks Rank #2 (read: ETFs in Focus as US Consumer Confidence Drops in October).

Materials

Materials Select Sector SPDR XLB: This is the most popular material ETF that follows the Materials Select Sector Index. It manages about $3.5 billion in its asset base and trades in volumes as heavy as around 6.7 million shares. In total, the fund holds about 28 securities in its basket with heavy concentration on the top firm and charges 13 bps in fees per year from investors. In terms of industrial exposure, chemicals dominates the portfolio with 71.4% share while containers & packaging, and metals & mining round off the top three positions. The product has a Zacks ETF Rank #2 with a Medium risk outlook.

Agnico Eagle Mines Limited AEM: Based in Toronto, Canada, Agnico Eagle Mines is a gold producer with mining operations in Canada, Mexico and Finland, and exploration activities in Canada, Europe, Latin America and the United States. The stock has an estimated earnings growth of 168.57% for this year and has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Technology

iShares U.S. Technology ETF IYW: This ETF offers exposure to 152 U.S. electronics, computer software and hardware, and informational technology companies by tracking the Dow Jones U.S. Technology Capped Index. The fund has amassed $4.4 billion in its asset base and charges 42 bps in fees and expenses. Volume is good as it exchanges nearly 133,000 shares in a day. Software & services, and tech hardware & equipment takes the largest share at 37.8% and 23.9%, respectively, while semiconductors & semiconductor equipment, and media & entertainment round off the next two spots. The fund has a Zacks ETF Rank #1 with a Medium risk outlook (read: Top-Ranked Sector ETFs to Buy for Q4).

Square Inc. SQ: Based in San Francisco, CA, Square offers financial and marketing services through its comprehensive commerce ecosystem that helps sellers to start, run and grow their businesses. The stock has an estimated earnings growth of 63.83% for this year and sports a Zacks Rank #1.

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