Safe Harbor ETFs

In a market that is down for the year and continues to present an uncertain outlook, which ETFs have managed to hold onto their value at this point in the year?

Setting aside the volatile energy and commodities sectors and the idea of shorting financials, we were still able to find five ETF categories that are unchanged or even higher from January levels.

Water

A slow but steady grower, domestic water ETFs haven’t gone up much but haven’t gone down either. The First Trust ISE Water Index Fund (FIW) holds the top 36 domestic companies in the industry including Tetra Tech (TTEK) and Pentair (PNR).   The PowerShares Water Resources Portfolio (PHO) is a modified equal-weighted portfolio of leading water companies including Tetra Tech and Itron (ITRI).

One caveat on water ETFs, the global funds have not held their value over the same time period.  Global Water ETFs include the PowerShares Global Water Portfolio (PIO) and Claymore S&P Global Water ETF (CGW).

For more on Water ETFs, see the theme guide – Investing in Water with ETFs.

Consumer Staples

With positions in companies such as Procter & Gamble (PG), Wal-Mart (WMT), Coca-Cola (KO) and Phillip Morris (PM), the consumer staples ETFs have steadily held their ground even during the sharp market sell-off at the beginning of the year.

The Vanguard Consumer Staples ETF (VDC) and Consumer Staples Select Sector SPDR Fund (XLP) are the two largest Consumer Staples ETFs.

Software

When the economy slows, big companies focus on productivity.  Replacing employees with software is a time-tested way to achieve productivity gains and the software sector is benefitting.

The S&P North American Technology-Software Sector Index Fund (IGV)  has large positions in major software companies such as Adobe (ADBE),Oracle (ORCL) and Symantec (SYMC).

Biotech

Consolidation in the Biotech sector has driven stocks higher recently continuing a recovery that began back in March.  The SPDR S&P Biotech ETF (XBI), and Nasdaq Biotechnology Index Fund (IBB) hold companies like Amgen (AMGN), Gilead (GILD) and Teva (TEVA).

XBI has outperformed IBB of late due to a stake in Genentech (DNA) which is an NYSE stock. For more on Biotech ETFs, see the Chart of the Week Biotech Consolidation from earlier this month.

Transports

The overall rise in oil prices has actually helped the transports sector more than hurt it.  The dominant presence of the large railroads has tempered the swings from package delivery companies Fedex (FDX) andUPS (UPS).

The Dow Jones Transportation Average Index Fund (IYT) also includes the airlines, but the collective market cap of this part of the industry is too small to impact the overall average.  The largest airline holding in the ETF isSouthwest Airlines (LUV) at #16.