3 ETFs That Could Offer Inviting Entry Points On Profit-Taking Market Dips
Investing.com | Aug 11, 2021 04:08
Recent days have brought new highs to the Dow Jones Industrial Average, the S&P 500 as well as the tech-heavy NASDAQ 100 index. As a result, many stocks, as well as exchange-traded funds (ETFs), have also seen strong results in 2021.
Today, we introduce three funds with robust returns that could possibly experience short-term profit-taking soon. Understandably, such a potential decline would mean a better entry point for interested investors.
h2 1. Vanguard Communication Services Index Fund ETF/h2Current Price: $144.57
52-Week Range: $97.78 - $147.88
Dividend Yield: 0.62%
Expense Ratio: 0.1% per year
The Vanguard Communication Services Index Fund ETF Shares (NYSE:VOX) invests in businesses in the communication services sector. Since its inception in September 2004, net assets have grown to $4.3 billion.
VOX, which has 116 holdings, tracks the returns of the MSCI US IMI Comm Services 25/50 Index. In terms of the sub-sectoral breakdown, the interactive media and services sector comprises the biggest slice, with 48.4%, followed by the movies and entertainment, and cable and satellite sectors, with 14.9% and 11%, respectively.
The fund’s top 10 names account for 68% of assets. Among those are Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG), Facebook (NASDAQ:FB), Disney (NYSE:DIS), Netflix (NASDAQ:NFLX) and Comcast (NASDAQ:CMCSA).
Over the past year, the fund is up about 41%; it saw a record high in late July. Trailing P/E and P/B ratios stand at 28.2x and 4.1x. As the names in the top holdings show, the fund has a high concentration of a number of growth names that have benefitted from pandemic lockdowns. We expect short-term declines in a number of these names between now and the next earnings season that is about two months away.
h2 2. Invesco S&P 500 Equal Weight Real Estate ETF/h2Current Price: $37.71
52-Week Range: $24.49– $38.47
Dividend Yield: 2.46%
Expense Ratio: 0.41%
Although technology has kept its leadership role in the current bull market, many other sectors have posted robust returns in the past year, too. The Invesco S&P 500® Equal Weight Real Estate ETF (NYSE:EWRE) provides access to the real estate sector. It started trading in August 2015, and net assets stand around $81.2 million.
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EWRE, which has 30 holdings, is based on the S&P 500 Equal Weight Real Estate Index. Both the index and the fund are rebalanced quarterly. In terms of market capitalization, we see an emphasis on mid-caps, followed by large-cap names. The top 10 names make up about 36% of net assets. No stock has a weighting of more than 3.75%.
Leading holdings include Extra Space Storage (NYSE:EXR), CBRE Group (NYSE:CBRE), United Dominion Realty Trust (NYSE:UDR), SBA Communications (NASDAQ:SBAC), Alexandria Real Estate Equities (NYSE:ARE), and AvalonBay Communities (NYSE:AVB).
The fund returned 41% in the past year and hit an all-time high in early August. The current price supports a dividend yield of close to 2.5%. There are numerous real estate index funds available to investors—many of them market cap-weighted. But we prefer the equal-weight aspect of EWRE. A potential decline toward the $35-$36.5 level would improve the margin of safety for long-term investors.
h2 3. iShares U.S Financial Services ETF/h2Current Price: $192.70
52-Week Range: $116.07– $192.08
Dividend Yield: 1.43%
Expense Ratio: 0.41%
The iShares U.S. Financial Services ETF (NYSE:IYG) provides access to the U.S. financial sector. Companies in the fund come from investment and commercial banks, asset management firms, credit card companies, as well as securities exchanges.
IYG, which has 105 holdings, is based on the Dow Jones U.S. Financial Services Index. The fund started trading in June 2000, and net assets stand at about $2.1 billion.
In terms of sectors, we see banks (41.10%) followed by diversified financials (40.67%) and software and services (17.63%). The top 10 names make up about 56% of net assets.
Leading holdings include JPMorgan Chase (NYSE:JPM), Visa (NYSE:V), Mastercard (NYSE:MA), Wells Fargo (NYSE:WFC) and BlackRock (NYSE:BLK).
The fund returned more than 52% in the past year and saw a record high in recent days. Financials have been an important part of the market recovery we’ve seen since the lows of 2020. The resilient consumer has provided tailwinds for many of the stocks in the fund.
Since the most recent earnings results last month, many of these shares have staged strong performances. Now, trailing P/E and P/B ratios of 24.89x and 2.21x show a stretched valuation level. Therefore, short-term profit-taking could soon be in the cards. A potential decline toward $180-$185 would offer a better entry point.
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