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4 Good Quality Sector ETFs & Stocks to Buy Right Now

Sanghamitra Saha

Wall Street has seen some respite this week. Investors probably started considering possibilities of a V-Shaped or U-shaped economic recovery. The impending meeting between Russia and Saudi Arabia, which can restore oil prices, has also aided the stock market rally.

Though some market pundits believe that the worst is over, some are still doubtful about the longevity of the market recovery. Thus, what can really safeguard you in this situation is investing in some good-quality sectors which are sort of coronavirus-proof and also have the strength to outperform in a post-pandemic economy.

Below we highlight four sectors that are pretty sturdy and have the most favorable Zacks Ranks.

Medical — #1

The broader medical sector currently has the top rank #1 among the 16 broad Zacks sectors. The novel coronavirus has by now infected more than 1.5 million people. Research on medicines and vaccines is being done at an “incredible pace.”

More than 140 experimental drug treatments and vaccines for COVID-19 are in the development phase globally, mostly in early stages, per Informa Pharma Intelligence, as quoted on Wall Street journal.

Also, healthcare is among the very few sectors which are likely to record earnings growth (up 1%) in first-quarter 2020, per Earnings Trends issued on Apr 8. The S&P 500’s total earnings are expected to decline 8.6%.

Health Care Select Sector SPDR ETF XLV — The Zacks Rank #2 (Buy) fund has diversified exposure to pharma (33.65%), Health Care Equipment & Supplies (24.27%), Health Care Providers & Services (18.70%) and Biotechnology (15.57%). It charges 13 bps in fees.

Moderna Inc. MRNA — Zacks Rank #2 stock is a hot bet.The company’s first potential vaccine was injected into people on Mar 16. The stock comes from a favorable Zacks industry (placed at the top 10% of total 250+ industries in the Zacks universe).

Utilities — #2

The first-quarter earnings of the utilities sector is expected to record 2% growth.  It is a non-cyclical sector and thrives in a low-rate environment, which is currently the case in the United States. The $2-trillion U.S. stimulus package should also help boost the sector. Despite a distressing job report for March, employment in utilities rose by about 800 from the previous month.

Utilities Select Sector SPDR ETF XLU — This Zacks Rank #2 fund puts 62.77% in electric utilities, followed by 31.72% multi-utilities and 2.8% in water. The fund charges 13 bps in fees.

American States Water Company AWR — The Zacks Rank #1 (Strong Buy) company provides fresh water, wastewater services and electricity to customers in the United States.

Business Services — #3

The sector takes the third spot. Among this, the Financial Transaction Services industry is part of the FinTech space. The industry includes card and payment processors, mobile payments, ATM service providers and so on.

An exponential rise in penetration of smartphones, growing adoption of mobile payments in emerging countries and rise of the m-commerce industry are expected to drive the global mobile payments industry ahead. The coronavirus outbreak also enhanced the lure for the sector as electronic payments are gaining precedence due to the contact-less mode of operation. The Business Services sector is likely to record 4.9% earnings growth in Q1.

ETFMG Prime Mobile Payments ETF IPAY) —The fund cashes in on the transition from cash/physical credit card payments to a mobile/digital system. It charges 75 bps in fees (read: Is the 'Worst Behind Us'? ETFs to Buy).

PayPal Holdings PYPL — This Zacks Rank #3 (Hold) companyoperates a technology platform offering online payment solutions. The stock comes from a favorable Zacks industry (top 34%).

Computer & Technology — #4

Technology, which is the fourth-place holder among the 16 broad Zacks sectors, will likely to see a slight drop in earnings (0.9%) in the first quarter. While many industries in the sector look well-positioned, the software space appears a hot spot for investment. Computer – Software is from a favorable Zacks industry (top 24%). The space is off just 1.8% in the past month compared with 10.5% loss in the S&P 500 ETF IVV.

Also, with COVID-19, enterprise spending on cloud and cyber security is likely to go up.  Enterprises are predicted to outlay about $12.6 billion on cloud security tools by 2023, up from $5.6B in 2018 (per Forrester), while spending on infrastructure protection will likely see a CAGR of 7.68%, quoted on Forbes.

SPDR S&P Software & Services ETF XSW—The Zacks Rank #1 fund is heavy on Application software (51.28%), followed by Data Processing & Outsourced Services (17.25%), Systems Software (16.90%) and IT Consulting & Other Services (10.09%). It charges 35 bps in fees.

Citrix Systems Inc. CTXS — The Zacks Rank #2 company is a leading provider of virtualization, networking and cloud computing solutions to more than 400,000 organizations worldwide.

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Citrix Systems, Inc. (CTXS) : Free Stock Analysis Report
 
Moderna, Inc. (MRNA) : Free Stock Analysis Report
 
American States Water Company (AWR) : Free Stock Analysis Report
 
Utilities Select Sector SPDR ETF (XLU): ETF Research Reports
 
Health Care Select Sector SPDR ETF (XLV): ETF Research Reports
 
PayPal Holdings, Inc. (PYPL) : Free Stock Analysis Report
 
iShares Core S&P 500 ETF (IVV): ETF Research Reports
 
SPDR S&P Software & Services ETF (XSW): ETF Research Reports
 
ETFMG Prime Mobile Payments ETF (IPAY): ETF Research Reports
 
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