The global markets have been grappling with severe strains provoked by various macroeconomic and geopolitical issues. Considering the presence of volatilities for some time, quality large-cap ETFs FT Cboe Vest Fund of Deep Buffer ETFs (BUFD), Schwab U.S. Large-Cap ETF (SCHX) and Global X NASDAQ 100 Covered Call ETF (QYLD) could be solid buys now.
The Federal Reserve’s aggressive interest rate hikes to levels not seen in the last 22 years to tame the stubbornly high inflation have been significantly successful, but inflation still remains higher than the desired target of 2%. This has placed the Fed in a challenging situation. To control inflation, it is critical to maintain high rates – a task that must be handled carefully to avoid plunging the economy into recession. Despite a year of consistent decrease in inflation, recent months have not shown definitive progress.
The Consumer Price Index (CPI) rose 0.4% month-over-month in September and punched in at 3.7% year-over-year, slightly outpacing expectations and keeping inflation in the spotlight for policymakers.
The U.S. economy grew at 4.9% annually in the July-September quarter, the highest rate recorded in nearly two years. However, economists cautioned that the growth could decelerate and extend until 2024.
Consumer spending growth, constituting over two-thirds of U.S. economic activity, surged at a 4% rate, contributing 2.69 percentage points to GDP growth. Even though wage growth has been sluggish, it has bolstered households' purchasing power.
Additionally, the U.S. market is undergoing significant changes due to a triple threat of high interest rates, escalated U.S. debt levels, and trade policies. This could cause prolonged instability in the market.
Given this context, investors could invest in large-cap ETFs as these offer an opportunity to hold shares in some of the most successful and reliable companies globally without necessitating individual company analysis or selection.
Therefore, let's take a look at the key attributes of the three Large Cap Blend ETFs, starting with number 3.
ETF #3: FT Cboe Vest Fund of Deep Buffer ETFs (BUFD)
BUFD is an ETF launched and managed by First Trust Advisors L.P. The fund is co-managed by Cboe Vest Financial, LLC. It invests in the public equity markets of the United States. The fund invests through other funds in stocks of companies operating across diversified sectors.
As of October 30, BUFD had $673.04 billion in AUM and an NAV of $20.84. Its expense ratio is 1.05%.
BUFD’s top holdings are FT Cboe Vest U.S. Equity Deep Buffer ETF - March, with an 8.45% weighting, followed by FT Cboe Vest U.S. Equity Deep Buffer ETF - September, with 8.39%, and FT Cboe Vest U.S. Equity Deep Buffer ETF - April, with an 8.37% weighting. It has a total of 12 holdings currently, with its top 10 assets comprising 83.56% of its AUM.
BUFD’s fund inflows came in at $109 million over the past three months and $169.32 million over the past six months. BUFD has gained 6.1% year-to-date and 6% over the past year to close the last trading session at $20.87.
BUFD’s POWR Ratings reflect this promising outlook. The ETF’s overall B rating equates to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
BUFD has an A grade for Buy & Hold and Peer. Of the 280 ETFs in the B-rated Large Cap Blend ETFs group, it is ranked #57. Click here to access BUFD’s rating for Trade.
ETF #2: Schwab U.S. Large-Cap ETF (SCHX)
SCHX tracks the Dow Jones U.S. Large-Cap Total Stock Market Index, a benchmark consisting of some of America’s largest companies. It is launched and managed by Charles Schwab Investment Management, Inc.
As of October 30, SCHX had $31.27 billion in AUM and an NAV of $49.04. Its total expense ratio of 0.03% compared to the category average of 0.37%.
As of October 30, the fund’s top holdings include Apple Inc. (AAPL) with a 6.67% weight, Microsoft Corporation (MSFT) with a 6.61% weight, and Amazon.com, Inc. (AMZN) with a 3.13% weight. The fund has a total of 756 holdings, with its top 10 assets comprising 29.01% of its AUM.
The fund pays $0.77 annually as dividends. This translates to a 1.58% yield at prevailing prices. The fund has a four-year average yield of 1.61%.
Over the past month, the fund’s net inflow came in at $52.96 million. Its net inflow stood at $265.61 million over the past six months. SCHX has gained 8.7% year-to-date and 1.2% intraday to close its last trading session at $49.06.
SCHX’s positive prospects are reflected in its POWR Ratings. The ETF has an overall rating of B, which equates to a Buy in our proprietary rating system.
The ETF has a B grade for Buy & Hold. Within the same group, it is ranked #27. To see all POWR Ratings for SCHX (Peer and Trade), click here.
ETF #1: Global X NASDAQ 100 Covered Call ETF (QYLD)
QYLD, launched and managed by Global X Management Company LLC., follows a “covered call” strategy in which the ETF buys the stocks in the Nasdaq 100 index and then sells corresponding call options to generate a little extra income for investors.
As of October 30, QYLD had $7.40 billion in AUM and a NAV of $16.39. Its total expense ratio is 0.60% compared to the category average of 0.37%.
As of October 30, the fund’s top holdings include AAPL with an 11.18% weight, MSFT with a 10.52% weight, and AMZN with a 5.75% weight. The fund has a total of 103 holdings, with its top 10 assets comprising 48.9% of its AUM.
The fund pays $2.04 annually as dividends. This translates to a 12.34% yield at prevailing prices. The fund has a four-year average yield of 12.27%.
Over the past year, the fund’s net inflow came in at $946.75 million. Its net inflow stood at $570.48 million over the past six months. QYLD has gained 4% year-to-date and marginally intraday to close its last trading session at $16.54.
QYLD’s strong fundamentals are reflected in its POWR Ratings. The ETF has an overall rating of A, which equates to a Strong Buy in our proprietary rating system.
The ETF has an A grade for Buy & Hold and Peer and a B for Trade. Within the Large Cap Blend ETFs group, it is ranked first. Click here to see the POWR Ratings for QYLD.
What To Do Next?
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SCHX shares were trading at $48.94 per share on Tuesday morning, down $0.12 (-0.24%). Year-to-date, SCHX has gained 9.61%, versus a 9.55% rise in the benchmark S&P 500 index during the same period.
About the Author: Sristi Suman Jayaswal
The stock market dynamics sparked Sristi's interest during her school days, which led her to become a financial journalist. Investing in undervalued stocks with solid long-term growth prospects is her preferred strategy. Having earned a master's degree in Accounting and Finance, Sristi hopes to deepen her investment research experience and better guide investors.
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