Some analysts and research firms can move individual stocks with their upgrades, downgrades and price targets. When it comes to exchange traded funds, ratings aren't believed to be as potent as with single stocks, but data indicate that some highly-rated ETFs deserve those ratings because they're delivering solid returns for investors.
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CFRA Research rates a fair amount of the more than 2,000 exchange traded products listed in the U.S., including fixed income, international equity and smart beta ETFs. Through the first half of 2017, ETFs with above-average ratings from CFRA have been performing well.
CFRA is pleased to share our top-ranked equity ETFs outperformed the S&P 500 benchmark in the first half of 2017 by 119 basis points, while bottom-ranked ETFs lagged by 24 basis points, said CFRA Director of ETF & Mutual Fund Research Todd Rosenbluth in a note out Tuesday. This is consistent with our long-term record. Of course, since our ETF rankings are not based on a three-year record or how well the product tracks an index, we believe past performance is not necessarily indicative of future results.
Many of this year's top asset-gathering ETFs are low fee products. With ETF issuers intensely fighting for investors' assets and with those investors realizing high fees are damaging to long-term total returns, issuers continue ratcheting down fees.
To us, it is no surprise that some asset managers have enacted fee reductions in recent years, said Rosenbluth. We agree that cheaper can be better and 79 of the 121 equity ETFs with an expense ratio of 0.15 percent or lower garner an Overweight ranking from CFRAs proprietary ETF ranking methodology. But investors need to look beyond the expense ratio.
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With annual fees of 0.14 percent and 0.1 percent, respectively, the Consumer Discretionary SPDR (ETF) (XLY) and the Vanguard Consumer Discretionary ETF (VCR) are two of the dominant ETFs tracking consumer cyclical stocks.
XLY and VCR are up an average of 11.5 percent year-to-date and both garner Overweight ratings from CFRA. While the low fees help, XLY and VCR are surging due to their large weights to Amazon.com, Inc. (AMZN), the largest consumer discretionary stock by market value.
Another Solid Low Fee Idea
The PowerShares QQQ Trust, Series 1 (ETF) (QQQ), the Nasdaq-100 tracking ETF, is up almost 21 percent this year. That proves an almost 19 percent combined weight to Amazon.com and Apple Inc. (AAPL) helps.
CFRA rates QQQ Overweight, a ranking aided by positive STARS and S&P Global Credit Ratings of its holdings, as well as bullish technical trends, a modest 0.20 percent expense ratio and a tight penny bid/ask spread. CFRA has Strong Buy or Buy recommendations on seven of its recent top-10 holdings including Apple and Amazon.com, said Rosenbluth.
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