5 Top-Ranked ETF Wins Amid Worst Market In 2022

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Wall Street wrapped up 2022 with the biggest annual loss since 2008 and the first yearly fall since 2018. Aggressive interest rate hikes to curb inflation, recession fears, the Russia-Ukraine war and rising concerns over COVID cases in China roiled the market badly throughout the year.

While there have been losers in many corners of the space, we highlight five ETFs from different industries that easily survived the market rout and outperformed last year. These have a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). The funds are, namely, VanEck Vectors Oil Services ETF (OIH - Free Report), iShares U.S. Insurance ETF (IAK - Free Report), Invesco DB US Dollar Index Bullish Fund (UUP - Free Report), WisdomTree U.S. High Dividend Fund (DHS - Free Report), and First Trust Nasdaq Food & Beverage ETF (FTXG - Free Report). These are likely to continue outperforming should the trends prevail.

The S&P 500 Index is down 19.4% this year — the benchmark’s first double-digit percentage loss since 2008, when it slid 36.6% during the global financial crisis, according to Dow Jones Market Data. The Dow Jones Industrial Average has declined 8.9% while the tech-heavy Nasdaq Composite Index plunged the most by 33.1%.

The Federal Reserve has been on an aggressive tightening policy to fight the skyrocketing inflation. The central bank has raised its interest rate by 475 basis points (bps) this year in the fastest hikes since the 1980s, taking the benchmark rate to the range of 3.75% to 4.00% — the highest level since 2008. The hike in interest rates has made borrowing expensive, pushed up the cost of buying a new car or house, and increased the cost of carrying credit card debt.

The aggressive approach has stoked worries of a recession, with top executives of major U.S. financial institutions, including JPMorgan, BlackRock, and Citi, forecasting a likely economic downturn in 2023.

Energy has been the only sector that has outperformed last year as oil prices have risen on tightening supply and higher demand conditions. On the other hand, the information technology and communication sector was badly hit due to a rout in growth shares as concerns over Fed's rapid interest rate hikes boosted U.S. Treasury yields.

We have profiled the above-mentioned ETFs in detail below:

VanEck Vectors Oil Services ETF (OIH) – Up 66%

VanEck Vectors Oil Services ETF tracks the MVIS U.S. Listed Oil Services 25 Index, which offers exposure to companies involved in oil services to the upstream oil sector, including oil equipment, oil services or oil drilling. It holds 25 stocks in its basket, with a higher concentration on the top two firms.

With AUM of $2.5 billion, VanEck Vectors Oil Services ETF charges 35 bps in annual fees. It trades in an average daily volume of 764,000 shares and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

iShares U.S. Insurance ETF (IAK) – 11.2%

With AUM of $566.3 million, iShares U.S. Insurance ETF offers exposure to U.S. companies that provide life, property and casualty, and full-line insurance. It tracks the Dow Jones U.S. Select Insurance Index and holds 56 securities in its basket.

Property & casualty insurance accounts for the largest share at 56.9%, while life & health insurance and multiline insurance round off the next two spots with double-digit exposure each. iShares U.S. Insurance ETF charges 39 bps in annual fees and trades in an average daily volume of 82,000 shares. It has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook.

Invesco DB US Dollar Index Bullish Fund (UUP) – Up 9.5%

Invesco DB US Dollar Index Bullish Fund is the prime beneficiary of a rising dollar as it offers exposure against a basket of six world currencies — euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. This is done by tracking the Deutsche Bank Long US Dollar Index Futures Index Excess Return plus the interest income from the fund’s holdings of U.S. Treasury securities.

Invesco DB US Dollar Index Bullish Fund has so far managed an asset base of $1.6 billion while seeing an average daily volume of around 4 million shares. It charges 77 bps in total fees and expenses and has a Zacks ETF Rank #2 with a Medium risk outlook.

WisdomTree U.S. High Dividend Fund (DHS) – Up 7.8%

WisdomTree U.S. High Dividend Fund offers exposure to U.S. equity from high dividend-yielding companies by tracking the WisdomTree U.S. High Dividend Index. It holds 376 stocks in its basket, with key holdings in energy, financials, utilities, healthcare and consumer staples that account for double-digit exposure each.

WisdomTree U.S. High Dividend Fund has amassed $1.5 billion in its asset base and trades in a solid volume of around 116,000 shares a day. It charges 38 bps in fees per year and has a Zacks ETF Rank #2 with a Medium risk outlook.

First Trust Nasdaq Food & Beverage ETF (FTXG) – Up 6.1%

First Trust Nasdaq Food & Beverage ETF offers exposure to U.S. companies within the food and beverage industry. It tracks the Nasdaq US Smart Food & Beverage Index, holding 30 securities in its basket, with each accounting for less than 8.2% share.

First Trust Nasdaq Food & Beverage ETF has AUM of $952.2 million and charges 60 bps in annual fees. It sees an average daily volume of about 119,000 shares and has a Zacks ETF Rank #2.


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