During the pandemic, growth stocks led the market’s impressive bull run. Investors looked favorably upon innovative and disruptive trends particularly with regard to technology, pushing many digitalization and alternative energy stocks to all-time highs.
It’s been a different story, however, in 2022. These former Wall Street darlings have come under significant selling pressure. In addition to investor profit-taking, markets have been pricing scarcer capital amid red-hot levels and the emergence of a hawkish Fed.
COVID-19 variants and the current war in Ukraine have added to the dismal picture for frothy growth shares, finally sending many stocks to multi-month lows.
Both the Index and the tech-heavy are down 15.3% and 14.8% year-to-date (YTD) respectively. Meanwhile, the has lost 8.5% since January.
Yet history tells us bearish market behavior eventually ends, and markets, especially robust growth shares, rebound. Thus, seasoned investors mostly love buying such beaten-down names in order to enjoy high returns in long-term portfolios.
Today’s post will introduce two growth exchange-traded funds (ETFs) that are likely to appeal to buy-and-hold investors.
1. Invesco S&P 500 Pure Growth ETF
- Current Price: $177.04
- 52-week range: $154.95-$223.10
- Expense ratio: 0.35% per year
First on our list is the Invesco S&P 500® Pure Growth ETF (NYSE:), which comprises a subset of stocks that exhibit strong growth characteristics and are listed on the S&P 500 index. The main criteria used to select securities: sales growth, earnings per share (EPS) growth, and price momentum.
RPG, which tracks the Index, has 58 holdings. With regard to sub-sectors, we see information technology (34.23%), healthcare (17.31%), consumer discretionary (14.50%), financials (12.54%), and industrials (6.77%), among others.
Close to 30% of the portfolio is in the top 10 stocks. Since its inception in March 2006, net assets have reached $2.47 billion.
Among the leading names on the roster are the integrated power group NRG Energy (NYSE:); cybersecurity company Fortinet (NASDAQ:); oil and natural gas name Diamondback Energy (NASDAQ:); financial services groups Goldman Sachs (NYSE:), and SVB Financial Group (NASDAQ:).
RPG returned about 8% in the past year and saw an all-time high in November 2021. However, this year, the ETF is down close to 16%.
Forward P/E and P/B ratios stand at 23.85x and 7.38x. Investors with a two- to three-year horizon could begin to find value around the current level.
2. iShares Semiconductor ETF
- Current Price: $462.30
- 52-week range: $386.02-$559.02
- Dividend yield: 0.79%
- Expense ratio: 0.43% per year
Over the past decade, the chip sector has exhibited explosive growth. Recent metrics highlight:
“Total semiconductor sales in 2022 are forecast to grow 11% and reach a record-high $680.6 billion after worldwide.”
Next on our list is the iShares Semiconductor ETF (NASDAQ:), which provides exposure to US chip stocks as well as semiconductor equipment companies.
SOXX, which has 30 holdings, was first listed in July 2001. Its benchmark is the ICE Semiconductor Index. The fund’s leading 10 names account for over 60% of its $8.14 billion net assets.
Broadcom (NASDAQ:), Advanced Micro Devices (NASDAQ:), Qualcomm (NASDAQ:), NVIDIA (NASDAQ:), Intel (NASDAQ:), and Texas Instruments (NASDAQ:) have the top spots in SOXX.
These semiconductor giants, which manufacture chips for thousands of products and applications, have mostly had a tough start to 2022. The ETF gained more than 12.2% in the last 12 months and saw a record high in early January. Yet, since then, it has lost 14.8%.
The semiconductor industry will stay at the center of artificial intelligence (AI), clean energy, electric vehicles (EVs), the Internet of Things (IoT), machine learning, and robotics, leading to a high chip demand. The recent slump in price presents an opportunity for retail investors looking for some of the top growth stocks to buy and hold. Trailing P/E and P/B ratios stand at 23.72x and 5.64x.