Wall Street witnessed wild swings in October fueled by a myriad of woes, ranging from rising interest rates, Italy’s political turbulence, and Saudi tensions to tech sell-offs, escalating U.S.-China trade war and mid-term election.
In fact, the chaos had sent the Nasdaq Composite Index and S&P 500 Index in correction territory toward the end of the month while Dow Jones was just a few percentage points away from that level. According to the to data from Howard Silverblatt of S&P Dow Jones Indices, the S&P 500 plunge shaved off $1.91 trillion in market cap last month with Amazon (NASDAQ:AMZN) , Microsoft (NASDAQ:MSFT) , Nvidia (NASDAQ:NVDA) , Facebook (NASDAQ:FB) and Apple (NASDAQ:AAPL) being the largest decliners (read: Amazon Slumps Nearly 14% in the Last 2 Days: ETFs in Focus).
The slowdown in global growth, especially in a few developing and developed economies added to the woes. The International Monetary Fund (IMF) recently slashed its global growth forecast by 0.2 percentage points for this year and the next, citing that trade tensions between the United States and its trading partners have started to hurt economic activity worldwide.
However, the stocks rebounded from the lowest level to close the month. Nasdaq tumbled 9.2%, its biggest monthly drop since November 2008 while the S&P 500 shed 6.9%, its biggest one-month slide since September 2011. The Dow Jones lost 5.1%, its biggest monthly fall since January 2016. A slew of strong earnings releases as well as rounds of upbeat economic data helped to revitalize investors’ sentiment somewhat.
That said, a few sectors easily survived the market rout and traded in the green last month. Below we have highlighted such three sectors and their best ETFs & stocks that have gained handsomely in October and could be better plays in the months ahead should the trends prevail.
Gold generally acts as a store of value and hedge against market turmoil. Acting as a leveraged play on the underlying metal prices, metal miners tend to experience more gains than their bullion cousins in a rising metal market. Hence, mining stocks and ETFs outperformed last month.
Market Vectors Gold Mining ETF (V:GDX) : This is the most-popular and actively traded gold miner ETF with AUM of $9.2 billion and average daily volume of around 40.7 million shares. The fund follows the NYSE Arca Gold Miners Index, holding 48 stocks in its basket. Canadian firms account for half of the portfolio, while the United States (16.5%) and Australia (15.9%) round off the top three. The fund charges 53 bps in annual fees and gained 2.2% last month (read: Gold Mining ETFs Slide on Dull Earnings).
Harmony Gold Mining Company Limited (NYSE:HMY) : This is a mining company which produces gold from its operations in the district of Virginia, Orange Free State. The stock saw positive earnings estimate revision of seven cents over the past month for this year and has estimated growth of 130.8%. It has a Zacks Rank #2 (Buy) and a VGM Score of C. The stock gained about 17.6% in October.
The utilities sector is making the most of all the uncertainty that’s looming around. Being the low-beta sector, utility is relatively protected from large swings (ups and downs) in the stock market and is thus considered a defensive investment or safe haven amid economic or political turmoil (read: 5 ETF Areas That Didn't Trick Investors in October).
Utilities Select Sector SPDR XLU: With AUM of $7.6 billion, this fund provides exposure to a small basket of 29 securities by tracking the Utilities Select Sector Index. It is heavily concentrated on the top firm while other firms hold no more than 8.3% share. Electric utilities take the top spot in terms of sectors at 62.6%, closely followed by multi utilities (32.2%). The product charges 13 bps in annual fees and sees a heavy volume of around 16.2 million shares on average. XLU gained 2% in October and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.
Polar Power Inc. (NASDAQ:POLA) : This is engaged in designing, manufacturing and selling direct current power, systems and cooling systems for telecommunications, military, hybrid power station, DC marine and rapid charging electric vehicle. The stock saw no earnings estimate revision for this year in the past month and its earnings are expected to grow 187.5%. It has a Zacks Rank #3 and VGM Score of B. It was up 6.5% last month.
The consumer staples sector is also viewed as defensive as it includes a variety of items like food & beverages, non-durable household goods, hypermarkets and consumer supercenters that are essential for daily needs. These products see steady demand even during an economic downturn due to their low level of correlation with economic cycles. As such, these generally act as a safe haven amid political and economic turmoil. Stocks in these sectors generally outperform during periods of low growth and high uncertainty (read: Shrug Off Rate Fears, Consumer Staples ETFs Are on a Tear).
Consumer Staples Select Sector SPDR Fund XLP: This is the most-popular consumer staples ETF with AUM of $9.1 billion and follows the Consumer Staples Select Sector Index. The fund charges 13 bps in fees per year from investors and trades in heavy volume of nearly 14.5 million shares a day. In total, the fund holds about 32 securities in its basket with heavy concentration on the top three firms. From a sector look, beverages takes the largest share at 25%, while food and staples retailing, household products, and food products round off the top four. XLP was up 2% last month and has a Zacks ETF Rank #3 with a Medium risk outlook.
The Boston Beer Company Inc. (NYSE:SAM) : This is America's leading brewer of world-class beer. The company witnessed solid earnings estimate revision of 39 cents in the past month and its earnings are expected to grow 24.46% this year. The stock has gained 14.6% in October. It carries a Zacks Rank #3 and has a VGM Score of B.
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