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The Rise of Tech Stocks and Opportunities Beyond
Tech Stocks Dominating the Market
Tech stocks have been the driving force behind market gains in recent years. The S&P 500 Equal Weight Information Technology index has seen impressive annualized returns of 12.5% over the past five years, far outpacing other sectors like consumer staples, energy, and financials. However, the tech sector's future remains uncertain due to potential mixed earnings reports and the possibility of a Fed rate hike.
Looking Beyond Tech for Opportunities
While tech stocks have been the star performers, there are other sectors that have also delivered strong returns. Morningstar data reveals funds outside of the tech and growth sectors that have outperformed over the last five years. These funds offer investors alternative investment options to diversify their portfolios and potentially capitalize on a range of industries.
Luxembourg Selection Active Solar
This fund focuses on companies in the global solar energy sector. Its top holdings include SolarEdge, Sunrun, JinkoSolar, Canadian Solar, and Enphase Energy. As the world transitions to clean energy, solar energy companies have the potential for significant growth and returns.
Fidelity Select Construction & Housing Portfolio
Investing in companies involved in residential, commercial, and other facility construction, this fund's top holdings include Home Depot, Johnson Controls International, Floor & Decor, and Trane Technologies. With the ongoing demand for housing and infrastructure development, these companies are positioned to benefit from continued growth in the construction industry.
Guinness Atkinson Alternative Energy Fund
This fund selects companies in the alternative energy sector, with a focus on renewable energy and energy efficiency. Top holdings include Schneider Electric, NextEra Energy, and Eaton. As the world continues to shift towards sustainable energy sources, companies in the alternative energy sector have the potential for substantial growth.
Shelton Sustainable Equity Fund
Investing in the "sustainable economy," this fund focuses on companies that mitigate the effects of environmental and economic risks. Top holdings include Darling Ingredients, Ormat, Bunge, and Danaher. These companies contribute to creating a more sustainable future while potentially delivering solid financial returns.
Global X Lithium and Battery Tech ETF
This ETF comprises lithium producers and lithium battery makers, which are essential to the electric vehicle industry. Top holdings include Albemarle, Samsung SDI, and CATL. As the demand for electric vehicles continues to rise, this ETF offers investors exposure to a rapidly growing market.
First Trust RBA American Industrial Renaissance ETF
This ETF measures the performance of small and mid-cap U.S. companies in the industrial and community banking sectors. Top holdings include Hubbell, MasTec, SPX Technologies, and Sterling Infrastructure. With the revival of American industries and infrastructure, these companies have the potential for significant growth opportunities.
Global X U.S. Infrastructure Development ETF
This ETF comprises companies that are part of the broader infrastructure theme, regardless of sector. Holdings include Eaton, Rockwell Automation, United Rentals, Trane Technologies, and Deere & Co. As governments around the world invest in infrastructure development, these companies stand to benefit from increased demand for their products and services.
Invesco Russell 1000 Dynamic Multifactor ETF
This ETF tracks the Russell 1000 Invesco Dynamic Multifactor Index, with a focus on sectors like financials, industrials, and consumer. Top holdings include United Airlines, Marathon Oil, Tyson Foods, Best Buy, and Synchrony Financial. By investing in a range of sectors, this ETF offers diversification and exposure to different growth opportunities.
Heptagon Fund ICAV - Driehaus US Micro Cap Equity Fund
This fund focuses on investing in U.S. micro-cap companies with good growth potential. Top holdings include Xenon Pharmaceuticals, e.l.f Beauty, TransMedics Group, and FTAI Aviation. Micro-cap companies can often be overlooked by larger investors, but they can offer significant growth opportunities for those willing to take a closer look.
Vanguard Baillie Gifford Global Positive Impact Stock Fund
This fund invests in high-quality companies that can deliver positive change in areas such as social inclusion, education, environment, healthcare, and addressing the needs of the world's poorest populations. Holdings include Moderna, Deere & Co, Alnylam Pharmaceuticals, Coursera, and Peloton. Investing in companies that prioritize positive social and environmental impact can align with investors' values while potentially delivering strong financial returns.
Invesco Water Resources ETF
This ETF tracks the Nasdaq OMX U.S. Water Index and includes companies that create products to conserve and purify water. With a focus on machinery, water utilities, and life sciences services, top holdings include Ecolab, American Water Works, and Xylem. As the world faces increasing water scarcity, companies in the water resources sector have the potential for significant growth as they provide solutions to this pressing issue.
By looking beyond the tech sector, investors can find a range of opportunities in industries such as solar energy, construction, alternative energy, sustainability, infrastructure development, and more. Diversifying one's portfolio with these funds and ETFs can help mitigate risks and potentially capitalize on the growth potential of various sectors.
Conclusion: Exploring Opportunities Beyond Tech Stocks for New Businesses
Hot Take: Diversification is the Key to Success
While tech stocks have been the darling of the market in recent years, new businesses should consider looking beyond this sector for opportunities. The rise of tech stocks may have created a sense of FOMO (fear of missing out) among investors, but there are other sectors that have also delivered strong returns and present promising growth potential.
Why Tech Stocks aren't the Only Game in Town
The tech sector's future remains uncertain due to potential mixed earnings reports and the possibility of a Fed rate hike. As a new business, it's important to consider the risks associated with investing solely in one sector. Diversification is crucial for long-term success and stability.
Exploring Alternative Investment Options
By diversifying their portfolios and exploring alternative investment options, new businesses can potentially capitalize on a range of industries. Funds like the Luxembourg Selection Active Solar or the Fidelity Select Construction & Housing Portfolio focus on promising sectors such as solar energy and construction, respectively. These industries are in line with the changing demands of a transitioning world, presenting opportunities for growth and returns.
Aligning with Sustainable and Social Impact Investing
Investors are increasingly interested in sustainable and socially responsible investments. Funds like the Guinness Atkinson Alternative Energy Fund and the Vanguard Baillie Gifford Global Positive Impact Stock Fund prioritize renewable energy, environmental sustainability, and positive social impact. New businesses that align with these values can attract a growing pool of investors looking for both financial returns and positive change.
Identifying Niche Opportunities
Micro-cap companies and ETFs focused on specific sectors, such as the Invesco Water Resources ETF, offer new businesses the opportunity to identify niche areas of growth. These companies provide solutions to pressing issues like water scarcity, offering potential for significant growth while addressing critical global challenges.
While tech stocks dominate the market, new businesses should not overlook the potential in other sectors. By diversifying their investment strategies and exploring opportunities in solar energy, construction, alternative energy, sustainability, infrastructure development, micro-caps, and socially responsible investing, businesses can position themselves in fast-growing industries and tap into new avenues of success. To navigate the ever-evolving market landscape, it's important for new businesses to consider a well-rounded approach that looks beyond the tech sector.
Article First Published at: https://www.cnbc.com/2023/07/28/these-non-tech-funds-had-top-annualized-returns-in-last-5-years.html