Buying Beaten-Up ETFs

This is my fourth weekly blog about ETFs. Last week, I discussed how ETFs are all over the place to start the year.

A Look at the Market

I follow 84 ETFs very closely right now, and they cover stocks, bonds and precious metals and bitcoins. Their market caps range from $379 million to $874 billion. The average is $95 billion. 19 of these ETFs (25%) are up more than 10% in price so far this year, with the S&P 500 up only 0.6%. A dozen are down, with four down more than 5%. Two of these are down more than 19%.

I wrote three articles about ETFs that were published at Seeking Alpha this week:

• IBIT: It Makes Sense To Take A Bite

• Vanguard Value ETF: Why Investors Should Exit

• XSW: I Like This Beaten-Up Tech ETF

Two of these were about ETFs that are very beaten up that I include now in my ETF model portfolio, as discussed below. iShares Bitcoin ETF (IBIT) is down 25.1% in 2026, while State Street SPDR S&P Software ETF (XSW), which is the smallest ETF on my Watch LIst and which I added this week, is down 19.6%.

Too many people in my view are focused on the S&P 500 for their investments, and it is up just a bit in 2026. The 11 sectors, though, are acting very differently from one another. Here is the return year-to-date of them from best to worst:

1. ENERGY: +25.1%

2. MATERIALS: +17.8%

3. CONSUMER STAPLES: +15.9%

4. INDUSTRIALS: +14.2%

5. UTILITIES: +11.8%

6. REAL ESTATE: +8.7%

7. HEALTH CARE: +3.5%

8. COMMUNICATIONS SERVICES: +0.3%

9. CONSUMER DISCRETIONARY: -2.1%

10. INFORMATION TECHNOLOGY: -3.6%

11. FINANCIAL: -6.1%

I find it interesting that 5 of the 11 sectors are up double-digit percentages. Perhaps more interesting is to consider the size of these sectors: The largest sectors are struggling. Here is a chart published by Standard & Poor's that covers the sector breakdowns for the S&P 500 as well as for the S&P 400 (Mid-caps) and the S&P 600 (Small-Caps):

The four largest S&P 500 sectors at year-end totaled 68.8% of the index, and they are all underperforming it in 2026 so far, especially Technology.

So, sectors matter this year, and so do market capitalizations, as the S&P 500 is getting beaten by the S&P 400 and the S&P 600. I tend to follow the Russell 2000 for Small-Caps. Here is a chart that shows the year-to-date performance of these three S&P indices as well as two for Russell:

While smaller is bigger in 2026 with investors than larger, the look since the end of 2022 shows how much larger companies have outpaced the returns of smaller ones:

Investors need to be aware of the reason that larger stocks as measured by the S&P 500 have outpaced smaller ones: the Magnificent 7. These 7 stocks made up 34.9% of the S&P 500 at the end of 2025. Adding an 8th one, which is part of the Elite 8, the total was 37.7%. Investors are very exposed to these names! All of the Elite 8 are up more than 68% since the end of 2022 in total return, with 7 up more than 106%, but they are all down in 2026:

The biggest stocks: Are they the best ones to own? If one thinks so, there are opportunities to take. I view these stocks as generally overpriced relative to other stocks. Not all stocks will outperform the Elite 8, but some will. Some of the beaten down stocks and other assets may be among those that do so. Just because something is beaten down, though, is not a reason to buy it necessarily.

ETF Model Portfolio Update

This ETF, which is measured against 60% SPY and 40% AGG, is up considerably relative to its benchmark. This week, I did several trades, all of which are published on my Seeking Alpha blog.

Going into the week, my equity exposure totaled just 43.6%, spread out across four ETFs. Here is what I did this week:

• Tuesday: I sold some VGSH to start a new position in IBIT. I also added a new position in XSW.

• Wednesday: I reversed the trade profitably

• Thursday: I reduced RSP and added to LTPZ (a little bit lower than where I had reduced it earlier in the week)

Here is the current model portfolio, which now has 48.0% equity exposure in 5 ETFs and fixed income exposure in 3 ETFs that totals 47.8%. There is also 4.0% invested in an a 9th ETF that is considered "Other":

How Can I Help You?

I enjoy analyzing ETFs and stocks, and I like sharing my thinking in writing. I am working on starting a subscription service at Seeking Alpha. What things would you as an investor like to see offered?

If you are an investment professional, I would like to work with you as well. I can help educate financial consultants about the ETFs, and I can work with management at investment firms to help create model portfolios or potential ETF investments. Please let me know if your firm would be interested in this.