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 outperformed the broader market over the past year.
- The industrial ETFs with the best 1-year trailing total return are HAIL, FTXR, and AIRR.
- The top holdings of these ETFs are Avis Budget Group Inc., Expeditors International of Washington Inc., and MYR Group Inc., respectively.
There are 26 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 Index has outperformed the broader market in the past year. The index has provided 1-year trailing total returns of 58.3% compared with 39.7% for the S&P 500, as of June 1, 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 June 1.
- 1-Year Trailing Total Returns: 128.4%
- Expense Ratio: 0.45%
- Annual Dividend Yield: 0.63%
- 3-Month Average Daily Volume: 70,689
- Assets Under Management: $235.1 million
- Inception Date: Dec. 26, 2017
- Issuing Company: State Street
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 stocks representing both developed and emerging markets. Auto parts and equipment companies and automobile manufacturers make up the largest share of the portfolio, accounting for a total of more than 35% of invested assets. The fund's top holdings include Avis Budget Group Inc. (CAR), which owns a number of rental car brands; Ford Motor Co. (F), the automotive manufacturer; and Textron Inc. (TXT), an aircraft, defense, and automotive manufacturer.
- 1-Year Trailing Total Returns: 88.4%
- Expense Ratio: 0.60%
- Annual Dividend Yield: 0.17%
- 3-Month Average Daily Volume: 124,531
- Assets Under Management: $1.2 billion
- Inception Date: Sep. 20, 2016
- Issuing Company: First Trust
FTXR is a multi-cap fund which utilizes a blended strategy, investing in both value and growth stocks. The fund targets the Nasdaq US Smart Transportation Index, which includes the 30 most liquid transportation securities from the NASDAQ US Benchmark Index. These securities are then ranked and weighted according to factors including volatility, value, and growth. The trucking, railroads, and transportation services industries account for close to half of invested assets. FTXR's top holdings include Expeditors International of Washington Inc. (EXPD), a logistics and freight forwarding company; C.H. Robinson Worldwide Inc. (CHRW), a multi-modal transportation services a third-party logistics provider; and PACCAR Inc (PCAR), a truck manufacturer.
- 1-Year Trailing Total Returns: 82.6%
- Expense Ratio: 0.70%
- Annual Dividend Yield: 0.09%
- 3-Month Average Daily Volume: 80,674
- Assets Under Management: $247.9 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, and includes bank stocks as a small share of its portfolio. The top holdings include MYR Group Inc. (MYRG), an electrical construction services company; Encore Wire Corp. (WIRE), a maker of copper and aluminum wire products; and MasTec Inc. (MTZ), a utility and communications infrastructure company.
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