The end of October is usually a busy time. It’s earnings season, and it usually means increased volatility for stocks.
In the coming days, investors will see quarterly reports from a variety of big names on Wall Street, including, Alphabet (NASDAQ 🙂 (NASDAQ :), Amazon (NASDAQ :), Apple (NASDAQ :), Boeing (NYSE :), eBay (NASDAQ :), General Electric (NYSE :), Mcdonalds (NYSE :), Microsoft (NASDAQ :), Texas instruments (NASDAQ :), and Twitter (NYSE :).
At the same time, traders are watching the, the benchmark for volatility in the US stock market. The VIX is based on, and shows traders’ expectations of the 30-day forward-looking volatility implied by S&P option prices.
The VIX is currently near 15.8. A month ago, it was well over 25. By comparison, by March 2020, in the early days of the pandemic, the VIX had risen to over 85.
Investors view the index as a useful indicator of market sentiment, as the VIX rises when the S&P 500 falls sharply. However, it is not always possible to predict the future of stocks as well as the CBOE volatility index.
However, readers who think we might see an increase in stock price movements might look for a number of low volatility exchange traded funds (ETFs). Today we are introducing two of these funds that may continue to see capital flows over the next few quarters.
1. SPDR SSGA US Large Cap Low Volatility Index ETF
- Current price: $ 143.08
- 52 week range: $ 104.50 – $ 143.28
- Dividend yield: 1.98%
- Expense ratio: 0.12% per year
The SPDRÂ® SSGA US Large Cap Low Volatility Index ETF (NYSE 🙂 invests in low volatility US stocks. The fund started trading in February 2013.
LGLV, which holds 138 positions, tracks the SSGA US Large Cap Low Volatility index. The top 10 names represent approximately 15% of net assets, which stands at $ 449.4 million. In other words, it is not a very heavy fund and wild fluctuations in the prices of individual stocks are limited. In terms of sub-sectors, we see industries (17.36%) followed by financials (16.52%), information technology (13.89%) and real estate (12.15%) .
Major holdings include real estate investment trusts American Tower (NYSE :), Public storage (NYSE :), Crown Castle International (NYSE :), Prologis (NYSE :), environmental service providers Republic Services (NYSE :), Waste Management (NYSE 🙂 and Electricity Distribution Group Domination Energy (NYSE :).
The fund has generated a return of 27.8% in the last 12 months and 19.2% in 2021. LGLV has also hit a record high in recent days. The P / E and P / B ratios are 25.95x and 4.05x. Interested readers may want to wait for a pullback to $ 140.
2. Invesco S&P MidCap Low Volatility ETF
- Current price: $ 55.58
- 52 week range: $ 41.19 – $ 55.82
- Dividend yield: 1.05%
- Expense ratio: 0.25% per year
The Invesco S&P MidCap Low Volatility ETF (NYSE 🙂 invests in 81 lowest-volatility mid-cap stocks in the past 12 months. The index and the fund are rebalanced quarterly.
XMLV, which was first listed in February 2013, has net assets of approximately $ 1.42 billion. The top 10 stocks represent around 15% of the fund. Industrials have the largest weighting, with 21.62%. Then come real estate (18.92%), utilities (13.89%) and materials (11.70%).
Among the biggest names, the producer of packaged bakery products Flowers Food (NYSE :), First industrial real estate trust (NYSE :), financial data platform FactSet Search Systems (NYSE :), IT group CACI International (NYSE :), which focuses on providing government intelligence and defense services, and a specialty chemicals group RPM International (NYSE :), known for its coatings and sealants.
XMLV is up 26.8% in the last year and 15.5% since the start of the year. It hit a record high in early September. The P / E and P / B ratios are 21.74x and 2.78x. Long-term investors might see a potential dip towards the $ 53 level as a better entry point.