With markets trading near all-time highs and naysayers warning of a coming correction, many investors and traders are asking how they can both stick around for any more gains and still limit their downside risk.

The answer could be the group of stocks known as industrials. For those who don’t know, the industrial goods sector is made up of companies that focus on aerospace, defense, industrial machinery, lumber, construction, metal fabrication and cement. Strategic investors often increase exposure to industrials during periods of global expansion, as they tend to outperform most other market segments. Industrial stocks also tend to pay higher-than-average dividends, so there's also a defensive element. If you need a quick refresher on this topic, check out The Case For The Industrial Sector.

An ETF With Broad Industrial Exposure

This week we’ll take a look at the iShares Global Industrials ETF (NYSE Arca:EXI), which is a popular vehicle for gaining exposure to a wide swath of industrials. Since early May 2013, EXI has gained an impressive 20.26%. As you can see from the chart below, an investment in global industrials has significantly outperformed broad-market indexes, such as the Dow Jones Industrial Average and the S&P 500.

Looking at the chart of EXI below, you’ll notice that it has been in a very strong uptrend over the past three years. See how the combinations of the long-term ascending trendline and the 200-day moving average (red line) have propped up the price each time the bears have tried to send the price lower. Long-term traders will use these levels as guides when creating their stop-loss orders. The relatively tight gap between the trendline and the current price suggests that current levels are an interesting entry level for those looking to enter into a long position.

Top Holdings and Key Stats of EXI

The EXI ETF was created by iShares to track the investment results of an index composed of global equities in the industrials sector. As of May 9, 2014, the fund has total net assets of $315 million and held 194 stocks. The fund carries a reasonable management fee of 0.48%, which makes this an inexpensive alternative to customizing a portfolio with a focus on global industrials. For those who are more inclined, a good place to start when looking to increase exposure may be to analyze the top holdings of EXI. They include General Electric Co. (NYSE:GE), Siemens AG (NYSE:SI), United Technologies Corp. (NYSE:UTX), The Boeing Co. (NYSE:BA) and 3M Co. (NYSE:MMM).

Taking a look at the five year chart of GE, which comprises 7.50% of the ETF, it's little wonder why the fund has experienced such strong growth. Other ETF component stocks display a similarly strong uptrend. Based on the charts, there are very few technical sell signals that would suggest that the trends will reverse anytime soon.

The Bottom Line

Investments in the industrials sector through products such as the iShares Global Industrial ETF may continue to reward investors as economic expansion continues. Funds such as EXI also provide holders with a layer of dividend income and capital protection that are not easily found in other market segments.

At the time of writing, Casey Murphy did not own shares of any company mentioned in this article.

Related Articles
  1. Chart Advisor

    Industrial Stocks Looking Strong Into Year End

    Industrials is the strongest sector recently. Here are industrial stocks to consider for short-term year-end trades.
  2. Investing News

    Should You Be Betting with Buffett Right Now?

    Following Warren Buffett's stock picks has historically been a good strategy. Is considering his biggest holdings in 2016 a good idea?
  3. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
  4. Mutual Funds & ETFs

    Pimco’s Top Funds for Retirement Income

    Once you're living off the money you've saved for retirement, is it invested in the right assets? Here are some from PIMCO that may be good options.
  5. Chart Advisor

    Watch This ETF For Signs Of A Reversal (BCX)

    Trying to determine if the commodity markets are ready for a bounce? Take a look at the analysis of this ETF to find out if now is the time to buy.
  6. Mutual Funds & ETFs

    ETFs Can Be Safe Investments, If Used Correctly

    Learn about how ETFs can be a safe investment option if you know which funds to choose, including the basics of both indexed and leveraged ETFs.
  7. Mutual Funds & ETFs

    The Top 5 Large Cap Core ETFs for 2016 (VUG, SPLV)

    Look out for these five ETFs in 2016, and learn why investors should closely watch how the Federal Reserve moves heading into the new year.
  8. Economics

    India: Why it Might Pay to Be Bullish Right Now

    Many investors are bullish on India for all the right reasons. Does it present an investing opportunity?
  9. Investing Basics

    Building My Portfolio with BlackRock ETFs and Mutual Funds (ITOT, IXUS)

    Find out how to construct the ideal investment portfolio utilizing BlackRock's tools, resources and its popular low-cost exchange-traded funds (ETFs).
  10. Investing

    3 Things About International Investing and Currency

    As world monetary policy continues to diverge rocking bottom on interest rates while the Fed raises them, expect currencies to continue their bumpy ride.
RELATED FAQS
  1. Should mutual funds be subject to more regulation?

    Mutual funds, when compared to other types of pooled investments such as hedge funds, have very strict regulations. In fact, ... Read Full Answer >>
  2. Do ETFs pay capital gains?

    Exchange-traded funds (ETFs) can generate capital gains that are transferred to shareholders, typically once a year, triggering ... Read Full Answer >>
  3. How do real estate hedge funds work?

    A hedge fund is a type of investment vehicle and business structure that aggregates capital from multiple investors and invests ... Read Full Answer >>
  4. Are Vanguard ETFs commission-free?

    While some Vanguard exchange-traded funds (ETFs) are available commission-free from third-party brokers, a large portion ... Read Full Answer >>
  5. Do Vanguard ETFs require a minimum investment?

    Vanguard completely waives any U.S. dollar minimum amounts to buy its exchange-traded funds (ETFs), and the minimum ETF investment ... Read Full Answer >>
  6. Can mutual fund expense ratios be negative?

    Mutual fund expense ratios cannot be negative. An expense ratio is the sum total of all fees charged by an asset management ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center