The encouraging development of coronavirus vaccines and hopes surrounding their effective deployment next year has over the past month ushered in stock market bullishness over the past month. In fact, all the three major indices hit a series of record highs in November. In addition, though the US Congress is still negotiating a second coronavirus relief package, a bipartisan group of senators have recently expressed optimism about a stimulus proposal expected this week. Given the backdrop, the US economy is likely set to stage a swift recovery.
As investors began mapping out and initiating their investment plans for new year, exchange-traded funds (ETFs) witnessed a monthly record of $91 billion of inflows in November Though the pandemic impacted sectors like entertainment, travel, and banking profoundly, these sectors have already started recovering and witnessing sharp gains.
Investors are positioning themselves to capitalize on the country’s ability to contain the virus’ spread and return to economic normality. Invesco Dynamic Leisure and Entertainment ETF (PEJ), U.S. Global Jets ETF (JETS), and SPDR S&P Regional Banking ETF (KRE) are three ETFs that are poised to gain traction with hopes to redirect back to the “old normal.”
Invesco Dynamic Leisure and Entertainment ETF (PEJ)
PEJ offers exposure to US media companies, making it a vehicle to gain targeted exposure to a specific sub-sector of the consumer discretionary industry. The ETF seeks to track the Dynamic Leisure & Entertainment Intellidex Index, a multi-factor, tiered equal-weighted index of the US entertainment and leisure industry stocks. The index is composed of companies engaged principally in the design, production or distribution of goods or services in the industry.
PEJ has an MSCI ESG Fund Rating of BB based on a score of 3.53 out of 10. The ETF has $610 million in AUM and an expense ratio of 0.63%. The fund also pays an annual dividend of $0.16, yielding 0.41%.
The fund currently holds 30 companies, with a 29% exposure to restaurants & bars, followed by 21.5% and 12.2% weighting to broadcasting, and entertainment products, respectively. The top 3 holdings of the fund are Sysco Corp (SYY), ViacomCBS Inc (VIAC) and Hilton Worldwide Holdings Inc (HLT), weighted 5.3%, 5.25% and 5%, respectively.
PEJ closed yesterday’s trading session at $38.25 and is down 14.9% year-to-date. However, the ETF is up 18.8% in the past month and has witnessed net inflows of $445.73 million in the same period. PEJ is presently trading 16.6% below its 52-week high of $45.87.
PEJ’s prospects are also apparent in its POWR Ratings, which according it a “Buy” rating. It also has an “A” for Trade Grade and a “B” for Industry Rank. It is ranked #39 out of 42 ETFs in the Consumer – Focused ETFs group.
U.S. Global Jets ETF (JETS)
The investment objective of JETS is to provide investors access to the global airline travel industry, including airline operators and manufacturers globally. The ETF tracks the US Global Jets Index, which is composed of the exchange-listed common stock (or depository receipts) of US and international passenger airlines, aircraft manufacturers, airports, and terminal services companies.
JETS is an MSCI ESG Fund Rating of B based on a score of 2.84 out of 10. The ETF presently has AUM of $2.94 billion and an expense ratio of 0.60%. The fund also pays an annual dividend of $0.39, translating to a yield of 1.66%.
The ETF is weighted more than 68% in US-based companies, while also being exposed to companies based in Canada and Hong Kong. JETS is more than 75% exposed to the Airlines sector, followed by the Airport Services, and Air Freight & Courier Services, with 9.2% and 8.2% weighting, respectively. It has a concentrated portfolio overweighted towards domestic passenger airlines. The top 3 of the 41 holdings by the fund are United Airlines Holdings Inc (UAL), Delta Air Lines Inc (DAL) and, American Airlines Group, Inc. (AAL), with s 10.3%, 10.1% and 9.8% weightings, respectively.
JETS has lost 25.6% so far this year, closing yesterday’s trading session at $17.46. However, the ETF is up 32.1% in the past month and has witnessed a net inflow of $437.46 million in the same period. JETS is presently trading 27.6% below its 52-week high of $32.36.
According to the POWR Ratings, JETS is a “Buy” and has a “B” for Trade Grade. It is also ranked #27 of 33 ETFs in the Industrials Equities ETFs group.
SPDR S&P Regional Banking ETF (KRE)
KRE provides investors a way to play regional banks, a sub-sector of the US banking sector. While traditional financial funds are dominated by large cap companies, this ETF maintains significant exposure to small- and mid-cap banking stocks. KRE tracks the S&P Regional Banks Select Industry, an equal-weighted index that covers US regional banks exclusively.
KRE has an MSCI ESG Fund Rating of BBB based on a score of 4.55 out of 10. The ETF currently has AUM of $1.79 billion and an expense ratio of 0.35%. KRE pays an annual dividend of $1.41, which translates into a 2.77% dividend yield.
KRE has an equal weighing of approximately 3.5% in all its holdings. The ETF holds 128 regional banks in its portfolio[ the top three major holdings of the fund are Regions Financial Corp (RF), SVB Financial Group (SIVB) and Huntington Bancshares Incorporated (HBAN).
KRE closed yesterday’s trading session at $50.84 and is down 10.1% year-to-date. However, the ETF witnessed a net inflow of $200.88 million in the past month and has gained nearly 23% in the same period. KRE is presently trading 14.4% below its 52-week high of $59.38.
KRE’s POWR Ratings reflect a promising outlook. The ETF is rated a “Buy” with an “A” for Trade Grade, and a “B” in Buy & Hold Grade and Industry Rank. Within the 38-ETF Financial Equities ETFs group, it is ranked #19.
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PEJ shares were trading at $38.38 per share on Tuesday afternoon, up $0.13 (+0.34%). Year-to-date, PEJ has declined -14.61%, versus a 16.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More…