In this article, we discuss 10 sector and international ETFs to buy. If you want to skip our detailed discussion on the international stock market, head directly to Diversified Stock Portfolio: 5 Sector ETFs and International ETFs to Buy.
As per a PwC report from early 2023, the global economy is predicted to expand by 1.6% during the year. This growth is primarily due to China reopening its economy after a prolonged period of lockdowns, alongside robust anticipated growth in India and other emerging economies. In the case of the United States, following a strong performance in 2022, it is expected to escape a recession in 2023, with the firm forecasting a GDP growth rate of just 0.2% for the world's largest economy. However, there are expectations of slight economic decline in the UK and some major European Union countries like Germany and Italy. After the world's largest central banks increased interest rates multiple times in 2022 and global demand slowed down as a result, it is anticipated that inflation will decrease during 2023. This decrease in prices of goods is expected to contribute to lower inflation rates in economies all over the world.
Due to supply chain challenges and geopolitical tensions, many companies are diversifying their supply sources, as noted by Deloitte. This diversification is expected to persist, leading to more capital leaving China and increased investments in other regions like Southeast Asia, India, Central Europe, and Mexico. Dr. Ira Kalish, Chief Global Economist at Deloitte stated:
“Despite tightness in the labor market, wages have failed to keep pace with inflation in most advanced economies. The result has been weaker consumer spending. In 2023, as inflation recedes, it is likely that wage growth will ultimately exceed inflation. This will boost consumer spending.”
According to Deloitte, Japan’s economy is likely to stabilize. The Japanese yen received a boost as the Bank of Japan made some changes to its monetary policy. On the other hand, India is relatively safer from the energy shock since it imports inexpensive oil from Russia, and its trade as a percentage of GDP is lower than many other countries. This shields India from some of the adverse effects of a global economic slowdown. Although inflation in India has been relatively high, it has recently started to decline.
J.P. Morgan reported that the global economy picked up speed in the first half of 2023, reaching a growth rate of 2.8%. So far, the impact of monetary tightening has been balanced out by the diminishing supply disruptions caused by the COVID-19 pandemic and Russia's Ukraine invasion. However, there is an expectation of more tightening measures in developed markets before the end of 2023 to control inflation. Unfortunately, additional tightening may have adverse effects on the private sector's health. J.P. Morgan Research predicts that the U.S. could experience a mild recession towards the end of 2023 due to the Federal Reserve's restrictive policies, which would lead to tighter credit conditions and gradual decline in growth. In Western Europe, high energy prices weighed down the economy during the fourth quarter of 2022, with some relief in the first quarter of 2023, although GDP growth remained slow. The economic outlook for the rest of the year is a growth rate of 1.5–2%.
On the other hand, Asia experienced robust growth in the first half of the year, with GDP gains averaging 5.2% above the region's potential, which was largely attributed to China reopening its economy. China is expected to achieve a 5.5% GDP growth rate in 2023. Haibin Zhu, Chief China Economist at J.P. Morgan, said:
“However, recovery following its reopening has been uneven, activity has been volatile and sentiment has been soft. Data disappointments since April have intensified concerns about China’s ongoing recovery and the likelihood of additional stimulus in the near-term appears to be low.”
Despite challenges in different sectors and world regions, there are positive performing ETFs that provide investors with broad exposure to companies like Broadcom Inc. (NASDAQ:AVGO), Apple Inc. (NASDAQ:AAPL), and NVIDIA Corporation (NASDAQ:NVDA), hence diversifying their stock portfolios.
We used an ETF screener and filtered out the best performing sector and international ETFs based on their 5-year performance. We selected 5 sector ETFs and 5 international ETFs to have a relatively inclusive list. We have also discussed the top holdings of the ETFs to offer better insight to potential investors. These ETFs have amassed significant gains in the past 5 years. The list is ranked in ascending order of the 5-year performance of these Sector ETFs and International ETFs as of September 26, 2023.
Diversified Stock Portfolio: Sector ETFs and International ETFs to Buy
10. Xtrackers MSCI Japan Hedged Equity ETF (NYSE:DBJP)
5-Year Performance as of September 26: 35.79%
The Xtrackers MSCI Japan Hedged Equity ETF (NYSE:DBJP) aims to match the performance of the MSCI Japan US Dollar Hedged Index. This ETF launched on September 1, 2007, and as of September 26, 2023, it holds assets under management worth 2.3 billion euros. Its expense ratio is 0.40%, and its portfolio follows a full replication strategy.
Toyota Motor Corporation (NYSE:TM) is the largest holding of the Xtrackers MSCI Japan Hedged Equity ETF (NYSE:DBJP). Toyota Motor Corporation (NYSE:TM) creates, builds, and markets a range of vehicles such as passenger cars, minivans, commercial vehicles, and the associated parts and accessories. The company functions through Automotive, Financial Services, and All Other segments.
According to Insider Monkey’s second quarter database, 13 hedge funds were bullish on Toyota Motor Corporation (NYSE:TM), up from 7 funds in the previous quarter. Ken Griffin’s Citadel Investment Group held a significant position in the company, with 106,398 shares worth $17.1 million.
In addition to Broadcom Inc. (NASDAQ:AVGO), Apple Inc. (NASDAQ:AAPL), and NVIDIA Corporation (NASDAQ:NVDA), Toyota Motor Corporation (NYSE:TM) is one of the best stocks to buy for investors looking to diversify their stock portfolios.
Here is what Baron Fund has to say about Toyota Motor Corporation (NYSE:TM) in its Q1 2022 investor letter:
“Toyota’s (NYSE:TM) “kaizen” manufacturing philosophy is based on improving manufacturing by using “just in time” processes to eliminate waste and reduce inventory carrying costs. Clearly the company does not contemplate disruptive change that will dramatically lower costs and improve quality.”
9. SPDR NYSE Technology ETF (NYSE:XNTK)
5-Year Performance as of September 26: 41.42%
The SPDR NYSE Technology ETF (NYSE:XNTK) aims to mirror the performance of the NYSE Technology Index. This index is made up of 35 prominent U.S.-listed technology companies. The ETF was introduced on September 25, 2000, and as of September 26, 2023, it manages assets worth $524.34 million. The expense ratio for this fund is 0.35%. The SPDR NYSE Technology ETF (NYSE:XNTK) assists investors in diversifying their stock portfolios.
Meta Platforms, Inc. (NASDAQ:META) is the top holding of the SPDR NYSE Technology ETF (NYSE:XNTK). Meta Platforms, Inc. (NASDAQ:META) is in the business of creating products that allow people worldwide to connect and share with their loved ones using devices like smartphones, computers, virtual reality headsets, and wearables. The company has two main divisions – the Family of Apps and Reality Labs.
According to Insider Monkey’s second quarter database, 225 hedge funds were bullish on Meta Platforms, Inc. (NASDAQ:META), compared to the last quarter when 220 funds had invested in the stock. Chase Coleman and Feroz Dewan’s Tiger Global Management held a significant position in the company, with approximately 8.6 million shares valued at $2.46 billion.
RiverPark Large Growth Fund made the following comment about Meta Platforms, Inc. (NASDAQ:META) in its Q2 2023 investor letter:
“Meta Platforms, Inc. (NASDAQ:META): META shares, continuing their rebound, were the top contributors for the second quarter. The company reported 1Q23 results, beating revenue expectations and lowering guidance for operating expenses and capital expenditures, while increasing revenue expectations.
META owns multiple social media platforms, each with more than one billion users, has an 80% gross margin, and generated $20 billion of FCF in 2022. Both its Facebook and its Instagram franchises have more than 2 billion Daily Active Users and generate the bulk of the company’s revenue. Recently, the company’s short form video offering, Reels, has gained mass user engagement and growing advertiser adoption, which we believe will return the company to strong revenue and free cash flow growth. After its advance, META shares trade at 19x Wall Street’s consensus estimates for 2024 EPS, estimates that we think could prove to be too low.”
8. SPDR S&P Capital Markets ETF (NYSE:KCE)
5-Year Performance as of September 26: 54.07%
The SPDR S&P Capital Markets ETF (NYSE:KCE) is one of the best ETFs to diversify investors' stock portfolios. It seeks to replicate the performance of the S&P Capital Markets Select Industry Index, accounting for returns before fees and expenses. This ETF provides exposure to the capital markets sector within the S&P TMI, which includes different sub-industries such as Asset Management & Custody Banks, Diversified Capital Markets, Financial Exchanges & Data, and Investment Banking & Brokerage. It was launched on November 8, 2005, and as of September 26, 2023, the fund holds assets valued at $310.52 million, with a portfolio comprising 64 stocks. The expense ratio for SPDR S&P Capital Markets ETF (NYSE:KCE) is 0.35%.
Coinbase Global, Inc. (NASDAQ:COIN) is the largest holding of the SPDR S&P Capital Markets ETF (NYSE:KCE). Coinbase Global, Inc. (NASDAQ:COIN) plays a vital role in the world of digital finance in the United States and around the world. They provide the go-to financial platform for individuals engaging in the crypto economy. Additionally, they enable developers with the tools and services necessary to develop applications based on cryptocurrencies, facilitating secure acceptance of digital assets as payment.
According to Insider Monkey’s second quarter database, 27 hedge funds were bullish on Coinbase Global, Inc. (NASDAQ:COIN), compared to 28 funds in the preceding quarter. Cathie Wood’s ARK Investment Management is the largest position holder in the company, with 12.12 million shares valued at $867.32 million.
Here is what Miller Value Partners Opportunity Trust Fund has to say about Coinbase Global, Inc. (NASDAQ:COIN) in its Q2 2022 investor letter:
“Coinbase Global Inc. Ordinary Shares (NASDAQ:COIN) fell during the quarter as the crypto markets continued to suffer. While the company reported disappointing results, it committed to capping EBITDA losses at $500M even in the event of “a prolonged market downturn”. COIN’s ample liquidity ($6b in cash on hand) should enable them to survive a prolonged “crypto winter” and invest to strengthen the business in the downturn. While the crypto market is early in its adoption, Coinbase is focused on building the platform for crypto not only supporting trading, and cold storage, but moving into NFTs, staking, and crypto derivatives. We see tremendous upside potential for COIN over the next decade if they are able to successfully execute on their platform strategy.”
7. iShares MSCI Denmark ETF (BATS:EDEN)
5-Year Performance as of September 26: 54.91%
The iShares MSCI Denmark ETF (BATS:EDEN) seeks to replicate the performance of the MSCI Denmark IMI 25/50 Index. This ETF provides investors with exposure to a range of companies in Denmark, offering a way to invest in Danish stocks. It was launched on January 25, 2012, and by September 26, 2023, the ETF held a portfolio consisting of 48 stocks. Its total assets amount to $230.4 million as of September 26, 2023, with an expense ratio of 0.53%.
Genmab A/S (NASDAQ:GMAB) is one of the top holdings of the iShares MSCI Denmark ETF (BATS:EDEN). Genmab A/S (NASDAQ:GMAB), based in Copenhagen, specializes in developing antibody-based treatments for a number of diseases, with a primary focus on cancer. According to Insider Monkey’s second quarter database, 11 hedge funds were bullish on Genmab A/S (NASDAQ:GMAB), up from 9 funds in the last quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 273,134 shares worth $10.4 million.
Like Broadcom Inc. (NASDAQ:AVGO), Apple Inc. (NASDAQ:AAPL), and NVIDIA Corporation (NASDAQ:NVDA), Genmab A/S (NASDAQ:GMAB) is one of the best international stocks to buy for investors looking to broaden their stock portfolios.
“Genmab A/S (NASDAQ:GMAB) is a developer of monoclonal antibody products for the treatment of life-threatening and debilitating diseases. Growth remains strong (+35% YoY in the most recent quarter) for Darzalex, the company’s leading therapy for multiple myeloma, and we continue to find Genmab’s new product pipeline as attractive. However, we trimmed the position based on valuation to support more compelling opportunities within biotech.”
6. First Trust Water ETF (NYSE:FIW)
5-Year Performance as of September 26: 61.94%
The First Trust Water ETF (NYSE:FIW) is designed to match the performance of the ISE Clean Edge Water Index. It aids investors in diversifying their stock portfolios. This ETF started on May 8, 2007, and as of September 26, 2023, it manages assets worth $1.32 billion, with a portfolio that includes 36 stocks. The expense ratio for this ETF is 0.53%.
Advanced Drainage Systems, Inc. (NYSE:WMS) is one of the largest holdings of the First Trust Water ETF (NYSE:FIW). Advanced Drainage Systems, Inc. (NYSE:WMS) is in the business of creating, manufacturing, and promoting thermoplastic corrugated pipes and other water management products. They provide drainage solutions mainly for the construction and agriculture sectors, serving customers in the United States, Canada, Mexico, and across the globe. The company functions through Pipe, International, Infiltrator, and Allied Products & Other segments.
According to Insider Monkey’s second quarter database, 30 hedge funds were bullish on Advanced Drainage Systems, Inc. (NYSE:WMS). This number increased from the previous quarter when 21 funds had invested in the stock.
Artisan Partners made the following comment about Advanced Drainage Systems, Inc. (NYSE:WMS) in its Q4 2022 investor letter:
“Advanced Drainage Systems, Inc. (NYSE:WMS) is a leading manufacturer of high performance thermoplastic corrugated pipe and related products serving the non-residential construction, residential construction, agriculture and infrastructure markets throughout North America. Shares declined after a disappointing earnings release as end markets softened faster than anticipated, especially its residential business where rising interest rates have cooled construction activity. We continue to believe the company is well-positioned to capitalize on the long-term shift in the pipe industry away from concrete and toward plastic materials, which are typically greener and more durable, but we reduced our position until these cyclical pressures wane.”
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Disclosure: None. Diversified Stock Portfolio: 10 Sector ETFs and International ETFs to Buy is originally published on Insider Monkey.