The Spear Alpha ETF SPRX topped the list of the best-performing U.S. equity ETFs in May, gaining 28.3%. The rally was driven by the hype surrounding artificial intelligence (AI) and investors’ flight to mega-cap tech stocks, which bolstered the overall tech sector.
Although most of the stocks in SPRX’s portfolio have delivered strong returns, a few have gained more than 35%. These include Marvell Technology MRVL, Zscaler ZS, Datadog DDOG, Advanced Micro Devices AMD and Cloudflare Inc. NET.
Based on data from BofA Global Investment Strategy, U.S. tech stocks are enjoying their greatest outperformance, relative to the S&P 500, in 97 years (read: Tech ETFs Burning Hot on AI-Fueled Nvidia Surge).
Investors are now more confident in the sector's ability to deliver strong growth. This is especially true as mega-cap tech stocks have strong balance sheets, durable revenue streams and robust profit margins, making them attractive investments. They are better positioned to withstand a possible economic downturn. Additionally, some high-profile tech companies have demonstrated improved cost discipline, leading to better-than-expected earnings improvement.
Additionally, AI has emerged as a significant driver of mega-cap tech's outperformance in recent weeks. The tech leadership is further supported by moderating U.S. inflation and bets that the Fed is nearing the end of its interest rate hiking cycle. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.
Further, the sector outlook remains solid given that the global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology will continue to fuel a rally.
Let’s take a closer look at the fundamentals of SPRX.
SPRX in Focus
The Spear Alpha ETF is an actively managed fund that invests in companies poised to benefit from breakthrough trends in industrial technology. The ETF’s objective is to find underappreciated opportunities across different industrial supply chains that are beneficiaries of secular themes such as enterprise digitalization, automation & robotics, artificial intelligence, environmental focus and decarbonization, photonics and additive manufacturing, and space exploration. The Spear Alpha ETF holds 23 stocks in its basket.
The Spear Alpha ETF has accumulated $4.1 million in its asset base and charges 75 bps in annual fees. It trades in an average daily volume of 4,000 shares (read: Tech ETFs Roaring to New 52-Week Highs).
Below we have highlighted the abovementioned five stocks in the ETF with their respective positions in the fund’s basket:
Best Performing Stocks of SPRX
Marvell Technology is a fabless designer, developer and marketer of analog, mixed-signal and digital signal-processing integrated circuits. The stock makes up for 6.69% share in the SPRX basket and has soared 64% over the past month.
Marvell Technology carries a Zacks Rank #3 (Hold) and has a Growth Score of B. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Zscaler is one of the world’s leading providers of cloud-based security solutions. The company offers a full range of enterprise network security services, including web security, Internet security, antivirus, vulnerability management, firewalls, and control over user activity in mobile, cloud computing, and Internet of Things environments. Zscaler has an estimated earnings growth rate of 123.2% for fiscal year (ending July 2023).
The stock has soared about 47.2% in a month and makes up for an 8.6% share in the SPRX basket. Zscaler has a Zacks Rank #3 and a Growth Score of B.
Datadog is a monitoring and analytics platform for developers, IT operations teams and business users in the cloud age. The company’s business runs around its portfolio of over 400 out-of-the-box integrations, including public cloud, private cloud, on-premise hardware, databases and third-party software. The stock has jumped 42.5% over the past month and accounts for a 3.1% share in the ETF.
Datadog has an estimated earnings growth rate of 19.39% for this year. It has a Zacks Rank #3 and a Growth Score of B.
Advanced Micro Devices has strengthened its position in the semiconductor market on the back of its evolution as an enterprise-focus company from a pure-bred consumer-PC chip provider. The stock has rallied 41.6% in May and makes up for 8.66% in the SPRX portfolio.
Advanced Micro Devices has a Zacks Rank #3 (read: 3 Reasons to Bet On Semiconductor ETFs Now).
Cloudflare platform protects and accelerates any Internet application online without adding hardware, installing software or changing a line of code. The stock jumped 36.7% and accounts for 8.04% share in the ETF.
Cloudflare has an estimated earnings growth rate of 153.8% for this year and carries a Zacks Rank #3.
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