IXC - Sector Ratings For ETFs And Mutual Funds: Q3 2023
2023-07-25 23:53:21 ET
Summary
- The Energy, Consumer Non-cyclicals, and Healthcare sectors each earn an attractive-or-better rating at the start of 3Q23, based on the aggregation of individual stock ratings.
- Investors are advised to focus on sector funds that hold quality stocks and have low fees, with iShares Global Energy ETF rated as the top Energy fund.
- The article warns that cheap funds can deceive investors and emphasizes the importance of investing in funds with good stocks and low fees.
At the beginning of the 3Q23 quarter of 2023, the Energy, Consumer Non-cyclicals, and Healthcare sectors each earn an Attractive-or-better rating. Our sector ratings are based on the normalized aggregation of our ratings for each stock in a given sector. Our stock ratings are based on five criteria that assess a firm's business strength and valuation.
Investors looking for sector funds that hold quality stocks should focus on the Energy, Consumer Non-cyclicals, and Healthcare sectors. Figures 4 through 7 provide more details on the ratings of overall sectors. The primary driver behind an Attractive fund rating is good portfolio management, or good stock picking, with low total annual costs.
Attractive-or-better ratings do not always correlate with Attractive-or-better total annual costs. This fact underscores that (1) cheap funds can dupe investors and (2) investors should invest only in funds with good stocks and low fees.
See Figures 4 through 13 for a detailed breakdown of ratings distributions by sector.
Figure 1: Ratings for All Sectors
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To earn an Attractive-or-better Predictive Rating, an ETF or mutual fund must have high-quality holdings and low costs. Only the top 30% of all ETFs and mutual funds earn our Attractive-or-better ratings.
iShares Global Energy ETF ( IXC ) is the top rated Energy fund. It gets our Very Attractive rating by allocating over 73% of its value to Attractive-or-better-rated stocks.
American Century Global Real Estate Fund ( ARYMX ) is the worst rated Real Estate fund. It gets our Very Unattractive rating by allocating over 63% of its value to Unattractive-or-worse-rated stocks. Making matters worse, it charges investors annual costs of 4.05%.
Figure 2 shows the distribution of our Predictive Ratings for all sector ETFs and mutual funds.
Figure 2: Distribution of ETFs & Mutual Funds (Assets and Count) by Predictive Rating
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Figure 3 offers additional details on the quality of the sector funds. Note that the average total annual cost of Very Unattractive funds is over two times that of Very Attractive funds.
Figure 3: Predictive Rating Distribution Stats
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*TNA = Total Net Assets* *Avg TAC = Weighted Average Total Annual Costs
This table shows that only the best of the best funds get our Very Attractive Rating: they must hold good stocks AND have low costs. Investors deserve to have the best of both and we are here to give it to them.
Ratings by Sector
Figure 4 presents a mapping of Very Attractive funds by sector. The chart shows the number of Very Attractive funds in each sector and the percentage of assets in each sector allocated Very Attractive-rated funds.
Figure 4: Very Attractive ETFs & Mutual Funds by Sector
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Figure 5 presents the data charted in Figure 4.
Figure 5: Very Attractive ETFs & Mutual Funds by Sector
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Figure 6 presents a mapping of Attractive funds by sector. The chart shows the number of Attractive funds in each sector and the percentage of assets in each sector allocated to Attractive-rated funds.
Figure 6: Attractive ETFs & Mutual Funds by Sector
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Figure 7 presents the data charted in Figure 6.
Figure 7: Attractive ETFs & Mutual Funds by Sector
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Figure 8 presents a mapping of Neutral funds by sector. The chart shows the number of Neutral funds in each sector and the percentage of assets in each sector allocated to Neutral-rated funds.
Figure 8: Neutral ETFs & Mutual Funds by Sector
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Figure 9 presents the data charted in Figure 8.
Figure 9: Neutral ETFs & Mutual Funds by Sector
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Figure 10 presents a mapping of Unattractive funds by sector. The chart shows the number of Unattractive funds in each sector and the percentage of assets in each sector allocated to Unattractive-rated funds.
The landscape of sector ETFs and mutual funds is littered with Unattractive funds. Investors in Healthcare have put over 24% of their assets in Unattractive-rated funds.
Figure 10: Unattractive ETFs & Mutual Funds by Sector
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Figure 11 presents the data charted in Figure 10.
Figure 11: Unattractive ETFs & Mutual Funds by Sector
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Figure 12 presents a mapping of Very Unattractive funds by sector. The chart shows the number of Very Unattractive funds in each sector and the percentage of assets in each sector allocated to Very Unattractive-rated funds.
Figure 12: Very Unattractive ETFs & Mutual Funds by Sector
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Figure 13 presents the data charted in Figure 12.
Figure 13: Very Unattractive ETFs & Mutual Funds by Sector
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This article originally published on July 12, 2023.
For further details see:
Sector Ratings For ETFs And Mutual Funds: Q3 2023