The industrial sector is comprised of companies that produce supplies and equipment used in construction and manufacturing, as well as businesses providing related services. The sector is closely linked with the broader economy, and industrial stocks tend to drop dramatically during periods of economic turmoil. Still, there are a variety of industrial subsectors that may perform differently based in their specific characteristics. Some of the best-known companies in the sector include Honeywell International Inc. (HON), Lockheed Martin Corp. (LMT), and 3M Co. (MMM). The industrial sector also includes air transportation services companies. Investors looking to gain exposure to the industrial sector may consider exchange-traded funds (ETFs) which provide access to broader baskets of stocks while reducing the risks typically involved with investing in individual names.
- The industrial sector significantly underperformed the broader market over the past year.
- The industrial ETFs with the best 1-year trailing total return are HAIL, PRN, and AIRR.
- The top holdings of these ETFs are AgEagle Aerial Systems Inc., Plug Power Inc., and Comfort Systems USA Inc., respectively.
There are 23 industrial ETFs that trade in the U.S., excluding leveraged or inverse funds as well as those with under $50 million in assets under management (AUM). The industrial sector as represented by the benchmark S&P 500 Industrials Sector Index has underperformed the broader market in the past year. The index has provided 1-year trailing total returns of 9.9% compared with 19.7% for the S&P 500, as of February 9, 2021. The best performing industrial ETF, based on performance over the past year, is the SPDR S&P Smart Mobility ETF (HAIL). Below, we’ll look at the best 3 industrial ETFs as measured by 1-year trailing total returns. All figures in the tables below are as of February 10.
- 1-Year Trailing Total Returns: 124.7%
- Expense Ratio: 0.45%
- Annual Dividend Yield: 0.96%
- 3-Month Average Daily Volume: 105,746
- Assets Under Management: $214.0 million
- Inception Date: December 26, 2017
- Issuing Company: State Street SPDR
HAIL is a multi-cap fund that targets the S&P Kensho Smart Transportation Index. The index comprises companies that are involved in the development of autonomous and electric vehicle technology as well as commercial drones and other advanced transportation systems. HAIL holds a portfolio of about 60 stocks, with just under 30% of invested assets concentrated in the 10 largest positions. The fund's top holdings include AgEagle Aerial Systems Inc. (UAVS), a commercial drone maker; Plug Power Inc. (PLUG), the maker of hydrogen fuel cell systems; and Ballard Power Systems Inc. (BLDP), the maker of fuel cell products.
- 1-Year Trailing Total Returns: 50.2%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 0.09%
- 3-Month Average Daily Volume: 29,344
- Assets Under Management: $212.8 million
- Inception Date: October 12, 2006
- Issuing Company: Invesco
PRN is a multi-cap growth fund that targets the Dorsey Wright Industrials Technical Leaders Index. The index aims to identify companies that show relative strength (momentum), and is composed of at least 30 securities from the NASDAQ US Benchmark Index. The fund's top three holdings include Plug Power; FuelCell Energy Inc. (FCEL), the fuel cell power company; and TransDigm Group Inc. (TDG), the aerospace manufacturing company.
- 1-Year Trailing Total Returns: 31.6%
- Expense Ratio: 0.70%
- Annual Dividend Yield: 0.09%
- 3-Month Average Daily Volume: 23,308
- Assets Under Management: $88.5 million
- Inception Date: March 10, 2014
- Issuing Company: First Trust
AIRR is a multi-cap fund that utilizes a blended mix of value and growth stocks in its portfolio. The fund targets the Richard Bernstein Advisors American Industrial Renaissance Index, an index of small- and mid-cap companies representing the industrial and community banking sectors. For this reason, AIRR does not provide pure play exposure to industrial stocks. AIRR holds about 57 stocks in its portfolio, with the top 10 holdings receiving just over 30% of assets. The top holdings include Comfort Systems USA Inc. (FIX), a company providing HVAC services to the mechanical services industry; Generac Holdings Inc. (GNRC), a maker of power generation products; and APi Group Corporation (APG), a provider of construction equipment and services.
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