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A Growth ETF For October

October 03, 2017: 08:19 AM ET

Among individual investment factors, growth is proving sturdy this year. While some investors are waiting on a value resurgence, the iShares S&P 500 Growth ETF (NYSE: IVW) is up more than 19 percent year to date, well ahead of the S&P 500.

IVW, which tracks the S&P 500 Growth Index, has rightfully earned its spot as CFRA Research's focus ETF for the month of October. CFRA rates IVW Overweight, the research firm's top rating given to exchange-traded funds.

The $19.1 billion IVW is one of the largest growth ETFs on the market. It holds 331 stocks, indicating that a significant portion of the S&P 500 can be considered growth fare.

Historical seasonal data indicate considering growth stocks early in the fourth quarter could be rewarding as November marks the start of the strongest six-month period for equities.

“The November-April period that begins shortly has been a favorable one for growth-oriented strategies,” said CFRA director of ETF & mutual fund research Todd Rosenbluth in a note out Monday. “According to Sam Stovall, chief investment strategist for CFRA, the S&P 500 Growth index rose on average 6.7 percent in the period dating back to 1990, ahead of the 2.5 percent gain for the benchmark in the May-October period.”

As is the case with many growth funds, IVW is highly allocated to the technology and consumer discretionary sectors. Those are the ETF's largest and third-largest sector weights, respectively, combining for about 52 percent of the fund's roster. Healthcare is IVW's second-largest sector exposure at 16.2 percent.

Related Link: Tech Tempts, But It's Pricey

“The S&P 500 Growth index benefits in part we think from its relatively high exposure to cyclical sectors that also performed the best during this seasonal six-month period,” said Rosenbluth.

IVW's top 10 holdings, which combine for about 29 percent of the ETF's weight, include familiar growth names such as Apple Inc. (NASDAQ: AAPL), Facebook Inc (NASDAQ: FB), Amazon.com, Inc. (NASDAQ: AMZN) and Google parent Alphabet Inc (NASDAQ: GOOG) (NASDAQ: GOOGL).

While some actively managed growth funds are performing well this year, historical data indicate that is not typical over the long term.

“In the three-year period ended June 2017, just 25 percent of actively managed large-cap growth mutual funds in the S&P Dow Jones Index Versus Active Scorecard (SPIVA) outperformed the S&P 500 Growth index,” said Rosenbluth. “On an equal-weighted basis, the 9.25 percent average gain among these 266 mutual funds lagged the index by 178 basis points.”

Related Link: A Global Staples ETF

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Index Last Change % Change
Dow 22,956.96 85.24 0.37%
Nasdaq 6,624.01 18.20 0.28%
S&P 500 2,557.64 4.47 0.18%
Treasuries 2.31 0.03 1.18%
Data as of 2:22am ET
Company Price Change % Change
Bank of America Corp... 26.24 0.41 1.59%
General Electric Co 23.36 0.38 1.65%
PG&E Corp 53.43 -4.29 -7.43%
Advanced Micro Devic... 14.26 0.04 0.28%
Micron Technology In... 41.49 1.09 2.70%
Data as of Oct 16

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