The S&P 500 has been enjoying smooth trading this year with the benchmark reaching the 69th record close of the year. SPDR S&P 500 ETF Trust SPY, the proxy version of the S&P 500 Index, has surged 27.5% this year and has the potential to ride higher in the New Year.
Strong holiday sales bolstered investors’ confidence, underscoring the strength of the economy that defied fears from the new variant of COVID-19 and inflation. Even though most of the stocks in SPY’s portfolio have delivered strong returns this year, a few have gained in double digits. These include Devon Energy DVN, Fortinet FTNT, NVIDIA NVDA, Ford Motor F and Moderna MRNA.
Strong Trends
Holiday sales surged the most in nearly two decades powered by soaring ecommerce sales as well as the rush to stores amid supply chain concerns, rising inflation and the raging new COVID-19 variant. Per a report from Mastercard, U.S. retail sales jumped 8.5% (for the period Nov 1-Dec 24) from last year, the highest in 17 years, and is up 10.7% from the pre-pandemic 2019 holiday period.
U.S. consumer confidence rose further in December, suggesting that the economy would continue to expand in 2022 despite a resurgence in COVID-19 infections and reduced fiscal stimulus. More consumers planned to buy houses and big-ticket items such as motor vehicles and major household appliances as well as go on a vacation over the next six months.
The Fed signaled a more aggressive unwinding of its pandemic-era monthly bond buying, setting the stage for three interest rates hikes in 2022 to fight inflation. The central bank plans to buy $60 billion per month of bonds in combined Treasuries and agency mortgage-backed securities starting in January, down from $90 billion in December and 120 billion from the start of the pandemic through November. The move indicates a solid recovery in the U.S. economy (read: Fed Speeds Up Taper Plans: Sector ETFs to Gain).
Let’s take a closer look at the fundamentals of SPY.
SPY in Focus
SPDR S&P 500 ETF Trust holds 505 stocks in its basket with each accounting for no more than 7% of assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, consumer discretionary, financials and communication services accounting for a double-digit allocation each.
SPDR S&P 500 ETF Trust has AUM of $441.2 billion and charges 9 bps in fees per year. The product trades in heavy volume of around 65.6 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors. SPY has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook (see: all the Large Cap Blend ETFs here).
Below we have highlighted the above-mentioned five best-performing stocks in the ETF from different industries.
Best-Performing Stocks of SPY
Devon Energy is an independent energy company engaged primarily in the exploration, development and production of oil and natural gas. The company’s oil and gas operations are mainly concentrated in the onshore areas of North America, primarily in the United States.
Devon Energy has soared 182.2% this year and has expected earnings growth of 61.3% for next year. DVN has a Zacks Rank #3 (Hold) and Growth Score of A.
Fortinet is a provider of network security appliances and Unified Threat Management network security solutions to enterprises, service providers and government entities worldwide. Its solutions are designed to integrate multiple levels of security protection, including firewall, virtual private networking, antivirus, intrusion prevention, web filtering, anti-spam and wide area network acceleration (read: Why These Tech ETFs Are Bargain Buys).
Fortinet has skyrocketed 147.5% and has expected earnings growth of 19.2% for 2022. It has a Zacks Rank #3 and Growth Score of A.
NVIDIA is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. Over the years, the company’s focus has evolved from PC graphics to artificial intelligence-based solutions that now support high performance computing, gaming and virtual reality platforms.
NVIDIA has climbed 137% year to date and has an estimated earnings growth rate of 73.2% for the fiscal year (ending January 2022). It has a Zacks Rank #2 You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Ford Motor designs, manufactures, markets and services cars, trucks, sport utility vehicles, electrified vehicles, and Lincoln luxury vehicles.
It has gained 136.6% year to date and has an estimated earnings growth rate of 1.9% for this year. Ford Motor has a Zacks ETF Rank #3 and Growth Score of B.
Moderna is a clinical-stage pharmaceutical company primarily focused on discovering and developing messenger RNA (mRNA) based therapies (read: Biotech ETFs That Outperformed Last Week).
Moderna has jumped 136.3% in 2021 and its earnings are expected to grow to $26.67 per share this year from a loss of $1.96 reported last year. Moderna has a Zacks Rank #3 and Growth Score of A.
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Ford Motor Company (F) : Free Stock Analysis Report
Devon Energy Corporation (DVN) : Free Stock Analysis Report
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
Moderna, Inc. (MRNA) : Free Stock Analysis Report
Fortinet, Inc. (FTNT) : Free Stock Analysis Report
SPDR S&P 500 ETF (SPY): ETF Research Reports
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