|Delayed - 05/13 05:03:41 pm|
Three ETFs to ride the wave
|04/15/2021 | 10:02am|
This week we will look at a value index, the SG Global Value Beta, which is outperforming the benchmarks. Let's move on to a trend that is a no-brainer for the years to come with an index playing the water sector: World Water Index. We will finish with an index specializing in homebuilding, the S&P Homebuilders.
SG Global Value Beta Index
Here is an index that has enabled us to play the sector rotation that began last November towards cyclical stocks and more recently towards defensive stocks at low valuations. It is the SG Global Value Beta Index composed of a basket of listed stocks that are attractively valued. The methodology consists of ranking stocks according to their valuation in relation to their respective sectors. The index is composed of stocks from developed markets with a capitalization of more than USD 1 billion. Stocks are ranked according to their valuation in relation to their sector. The valuation is based on five ratios that are equally weighted in the final score: price/book value, price/earnings, price/estimated earnings in one year, enterprise value/EBITDA, and price/free cash flow. The index represents a basket of the 200 cheapest stocks based on the above scores. While it appears that sector rotation has not yet reached its full potential, there is one ETF that will benefit from this attractiveness: the Lyxor SG Global Value Beta ETF (LU1081771369 - SGVB), which seeks to replicate the index presented.
Performance of the Lyxor ETF compared to two benchmarks: STOXX Europe 600 and S&P500 since
World Water Index
The objective of the World Water Index is to reflect the performance of the global water sector. The selection of stocks is made by RobecoSAM, and is based on companies involved in the management of infrastructure such as sewage or water treatment. Each company is weighted according to its capitalization, but may not represent more than 10% of the portfolio. Among the main lines are Geberit, American Water Works, Xylem, Masco and Veolia Environnement.
This index has a good ESG score, in addition to its performance, slightly outperforming the MSCI World since the beginning of 2019. This index is replicated by Lyxor in its distributing ETF Lyxor World Water (WAT).
Performance of the Lyxor ETF compared to the MSCI World since January 2019
As its name suggests, the S&P index includes companies related to housing: from the construction of single-family homes to the home security company, via the furniture manufacturer. The index was created in 2006 and outperforms the S&P Composite 1500. On average, Homebuilders outperforms the Composite by 2% per year over a 10-year period. Half of the companies in the index are big caps, with an average capitalization of $26 billion. We find companies like D.R. Horton, RH or Masco Corporation.
This index allows us to surf on the dispersion of employees with the advent of a trend that could remain sustainable: telecommuting. For example, the furniture retailer will benefit from this trend with the development of work rooms within the family home. S&P also provides an ETF to invest in the index, the SPDR S&P Homebuilders (XHB)
Source: S&P, MarketScreener