Sector ETFs give you a convenient way to monitor, analyze and trade different sectors of the economy. When the overall stock marketgauged by an index such as the S&P 500is moving higher, one, two or possibly three sectors will be the strongest, while other sectors will be laggards. By monitoring which sector ETFs are top performers, you'll continually stay on top of where traders are investing and where the most profits lie after all, the strongest sector is producing the largest return. Take it one step further and you can isolate the strongest stocks in the strongest sector, and zero in on the stocks that are holding up the best when the overall market falls . Here we look at nine major sector ETFs and their top holdings, and we isolate the most tradable stock(s) in each based on performance and volume:


XLY - Consumer Discretionary Select Sector SPDR

This sector focuses on companies that provide customers with the non-essentials. Included in the sector are companies from retail, media, hotels, luxury goods, cars, leisure and apparel .

Top 10 Holdings (as of Nov. 5, 2012)

  1. Comcast Corp Class A (CMCSA): 6.86%
  2. Home Depot, Inc. (HD): 6.77%
  3. Amazon.com Inc (AMZN): 6.29%
  4. Walt Disney Co (DIS): 6.15%
  5. McDonald's Corporation (MCD): 6.06%
  6. News Corporation Class A (NWSA): 3.46%
  7. Time Warner Inc (TWX): 3.10%
  8. Ford Motor Co (F): 3.01%
  9. Target Corp (TGT): 2.85%
  10. Lowe's Companies Inc. (LOW): 2.84%

The top stock for the sector ETF is Comcast. With average volume near 15 million shares a day, volume is rarely a concern, making it the most tradable stock of the ETF's major holdings. The runner up is Home Depot, which has moved up about 60% over the last year and is averaging about 12 million shares a day.


XLP - Consumer Staples Select Sector SPDR

This sector includes companies that have strong demand regardless of economic conditions, including food retailers and products, beverages, personal products and tobacco.

Top 10 Holdings (as of Nov. 5, 2012)

  1. Procter & Gamble Co (PG): 13.68%
  2. Philip Morris International, Inc. (PM): 10.76%
  3. Coca-Cola Co (KO): 10.44%
  4. Wal-Mart Stores Inc (WMT): 8.61%
  5. PepsiCo Inc (PEP): 4.46%
  6. Altria Group Inc. (MO): 4.42%
  7. CVS Caremark Corp (CVS): 4.33%
  8. Colgate-Palmolive Company (CL): 3.56%
  9. Costco Wholesale Corporation (COST): 3.33%
  10. Mondelez International Inc (MDLZ): 3.08%

Over the last two years, three stocks stand out: CVS Caremark, Philip Morris International and Costco Wholesale. All three gained very close to 50% over that time frame, but CVS has the highest average daily volumesix millionmaking it highly tradable. Philip Morris averages 5.4 million shares per day and Costco 2.4 million.


XLE - Energy Select Sector SPDR

What fuels the economy and transportation is included in this sector oil, gas and consumable fuel companies as well as related products, equipment and services .

Top 10 Holdings (as of Nov. 5, 2012)

  1. Exxon Mobil Corporation (XOM): 19.30%
  2. Chevron Corp (CVX): 14.88%
  3. Schlumberger NV (SLB): 6.97%
  4. Occidental Petroleum Corporation (OXY): 3.74%
  5. ConocoPhillips (COP): 3.59%
  6. Anadarko Petroleum Corp (APC): 2.99%
  7. EOG Resources (EOG): 2.72%
  8. Halliburton Company (HAL): 2.61%
  9. National Oilwell Varco, Inc. (NOV): 2.60%
  10. Apache Corporation (APA): 2.45%

EOG Resources racked up the highest gain over the last two years (33%), but it was also one of the most volatile stocks in the top holdings. Chevron increased 29% over the same time frame, but its sell-offs and rallies were less dramatic than EOG Resources. Chevron also averages six million shares a day, compared to 1.7 million for EOG Resources.


XLF - Financial Select Sector SPDR

This sector ETF reflects financial companies, including insurance companies, banks, capital markets, trusts, consumer finance and real estate .

Top 10 Holdings (as of Nov. 5, 2012)

  1. Wells Fargo & Co (WFC): 8.53%
  2. Berkshire Hathaway Inc Class B (BRK.B): 8.50%
  3. JPMorgan Chase & Co (JPM): 8.21%
  4. Bank of America Corporation (BAC): 5.59%
  5. Citigroup Inc (C): 5.33%
  6. U.S. Bancorp (USB): 3.22%
  7. American Express Co (AXP): 2.90%
  8. Goldman Sachs Group Inc (GS): 2.79%
  9. Simon Property Group Inc (SPG): 2.43%
  10. American International Group Inc (AIG): 2.03%

Simon Property Group is the runaway leader over the last two years, moving up 52%. Next in line is U.S. Bancorp with a 35% over the same period. Volume in Simon Property Group is on the lower side at 1.2 million shares per day, versus U.S. Bancorp at 8.7 million.

XLV - Health Care Select Sector SPDR

If it is health related, it is likely included in this sector. XLV includes healthcare providers and equipment, pharmaceuticals, biotechnology, and health and science tools/services.

Top 10 Holdings (as of Nov. 5, 2012)

  1. Johnson & Johnson (JNJ): 12.47%
  2. Pfizer Inc (PFE): 12.12%
  3. Merck & Co Inc (MRK): 8.75%
  4. Abbott Laboratories (ABT): 5.61%
  5. Amgen Inc (AMGN): 4.44%
  6. Gilead Sciences Inc (GILD): 3.68%
  7. UnitedHealth Group Inc (UNH): 3.67%
  8. Bristol-Myers Squibb Company (BMY): 3.57%
  9. Eli Lilly and Company (LLY): 3.25%
  10. Express Scripts (ESRX): 2.98%

Gilead Sciences took off in 2012, and over the last two years is up just over 100%. Strong volume of 8 million shares a day makes this stock the most tradable of the ETF's top holdings. Amgen is also a strong performer, up 62% over the same period with 4.2 million in daily volume .


XLI - Industrial Select Sector SPDR

This sector reflects companies that buildor are involved in the production ofproducts. Aerospace, machinery, railroads, construction, engineering, airlines and logistics companies are all included.

Top 10 Holdings (as of Nov. 5, 2012)

  1. General Electric Co (GE): 12.53%
  2. United Technologies Corp (UTX): 5.30%
  3. Union Pacific Corp (UNP): 4.80%
  4. Caterpillar Inc (CAT): 4.50%
  5. 3M Co (MMM): 4.50%
  6. United Parcel Service Inc (UPS) Class B (UPS): 4.06%
  7. Boeing Co (BA): 3.89%
  8. Honeywell International, Inc. (HON): 3.83%
  9. Emerson Electric Co. (EMR): 2.93%
  10. Deere & Co (DE): 2.79%

Both Union Pacific and General Electric performed similarly over the last two years, up 36% and 34% respectively. GE has far superior volume, averaging 44.4 million compared to 1.9 million for Union Pacific. Even with the slight underperformance, GE is the more tradable stock.


XLB - Materials Select Sector SPDR

This sector focuses on materials used for the production of products. Chemical, mining, forestry products, packaging and construction materials companies are included.

Top 10 Holdings (as of Nov. 5, 2012)

  1. Monsanto Company (MON): 10.89%
  2. E.I. du Pont de Nemours & Company (DD): 8.95%
  3. Freeport-McMoRan Copper & Gold Class B (FCX): 8.26%
  4. Dow Chemical Co (DOW): 8.07%
  5. Praxair, Inc. (PX): 7.13%
  6. PPG Industries, Inc. (PPG): 4.29%
  7. Ecolab, Inc. (ECL): 4.23%
  8. Newmont Mining Corporation (NEM): 4.09%
  9. Air Products & Chemicals Inc (APD): 3.97%
  10. LyondellBasell Industries NV (LYB): 3.76%

LyondellBasell is the top performer over the last two years, up 63%. PPG Industries gained 57%, Monsanto 53% and Ecolab 46%. Ecolab was the steadiest of the four stocks, and didn't have the same magnitude of swings as the others, favoring those that are more conservative. PPG Industries and Ecolab do less than 1.4 million per day in volume. With 5.1 million in daily volume, LyondellBasell is currently this sector ETF's clear leader.


XLK - Technology Select Sector SPDR

This ETF captures the overall performance of the technology sector. Companies include computers and related software/hardware manufacturers, telecommunications services and equipment, semiconductors, IT and wireless services, and Internet and office electronics .

Top 10 Holdings (as of Nov. 5, 2012)

  1. Apple Inc (AAPL): 19.20%
  2. International Business Machines Corp (IBM): 7.15%
  3. Microsoft Corporation (MSFT): 7.03%
  4. AT&T Inc (T): 6.89%
  5. Google, Inc. Class A (GOOG): 6.47%
  6. Verizon Communications Inc (VZ): 4.42%
  7. Oracle Corporation (ORCL): 4.30%
  8. Qualcomm, Inc. (QCOM): 3.82%
  9. Cisco Systems Inc (CSCO): 3.50%
  10. Intel Corp (INTC): 2.92%

This pick is probably not a surprise. Apple is the most tradable stock of the top holdings in the technology sector ETF; the stock is up 85% over the last two years. Even with a price tag over $500, more than 19 million shares change hands each day. Verizon Communications is the runner-up, increasing 35% over the last two years with daily volume greater than 13.4 million.


XLU - Utilities Select Sector SPDR

XLU includes companies involved in electrical and gas utilities, as well as power producers and energy traders .

Top 10 Holdings (as of Nov. 5, 2012)

  1. Duke Energy Corporation (DUK): 9.54%
  2. Southern Co (SO): 8.76%
  3. Dominion Resources Inc (D): 6.74%
  4. NextEra Energy Inc (NEE): 6.68%
  5. Exelon Corp (EXC): 5.93%
  6. American Electric Power Co Inc (AEP): 4.78%
  7. FirstEnergy Corp (FE): 4.09%
  8. PG&E Corp (PCG): 4.04%
  9. PPL Corp (PPL): 3.94%
  10. Consolidated Edison, Inc. (ED): 3.79%

NextEra Energy led this sector ETF, as the stock climbed 33% over the last two years. Volume of 1.8 million shares is enough for most investors, but very active traders may prefer higher volume. Dominion Resources and FirstEnergy claim runner-up spots, gaining 20% over the last two years. Both stocks do roughly two million in daily volume.


Stocks Worth A Look

"Most tradable" or even performance measures can be a subjective topic. Your personal situation will determine which stocks are better for you to trade, and which you should avoid. Past performance, volume and volatility are elements to consider when making these choices. Of course, it is always important to remember that past data may not reflect what will happen in the future.

Disclosure: No positions at time of writing.

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