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Best And Worst Of Q4 2019: Industrials ETFs And Mutual Funds

The Industrials sector ranks fifth out of the 11 sectors as detailed in our Q4'19 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Industrials sector ranked fifth. It gets our Neutral rating, which is based on an aggregation of ratings of the 421 stocks in the Industrials sector.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Industrials sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 21 to 354). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Industrials sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best and Worst Ratings - Top 5



* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Three ETFs (JETS, FTXR, HECO) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best and Worst Ratings


* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

XHB is the top-rated Industrials ETF and FSLEX is the top-rated Industrials mutual fund. XHB earns a Very Attractive rating and FSLEX earns an Attractive rating.

UFO is the worst rated Industrials ETF and PGIAX is the worst rated Industrials mutual fund. UFO earns an Unattractive rating and PGIAX earns a Very Unattractive rating.

In total, 421 stocks of the 2,850-plus we cover are classified as Industrials stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance.

Performance of Holdings = Performance of Fund

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: Cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Industrials ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs



Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds