Sep 24, 2020
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Materials Sector ETF Gaps Up, Nearing New High

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What happens when a decidedly non-glamorous sector shows strength? Making money is always the goal of investors so it can pay to appreciate what s happening with a sector that doesn t get much love in the media. One of those so-called boring sectors materials is up 4% in September and more than 5% year-to-date


The materials sector is taking a leadership role for the instant anyway as the always-sexy information technology sector takes a breather. The materials sector is made from companies in the construction materials chemicals forest products metals mining companies and packaging products among other subindustries. One cause of its current outperformance is the health of the housing market


Forestry products are selling well on demand for new home construction and home repairs and remodels. Low interest rates and stimulus payments were factors driving those trends. Economic recovery the pace of which is highly uncertain is usually a driver of continued sector performance. Heaviest Weightings Within Sector It s often instructive to apply a sector ETF as a proxy for performance in addition to appreciate the arena internals The Materials Select Sector SPDR ETF (XLB) XLB is up 3


75% year to date. Performance of an ETF is always somewhat less than its underlying index as an ETF incurs fees not found in the index itself. As with any index the main heavily weighted stocks have the greatest sway over performance. The biggest weightings in the materials sector are not necessarily the household names you ll find in a sector like technology or consumer discretionary


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K. -based supplier of industrial gas is up 18. 86% year to date. Despite industrial slowdowns earlier in the pandemic the company has been growing sales. It reported earnings per share of $1. 90 in the latest quarter beating analyst estimates by 15%. Air Products & Chemicals APD (APD) This company is also a provider of industrial gases and related gear to various industries


The stock is up 28. 94% year to date. It topped analysts earnings expectations by 1. 16% last quarter. The stock has gotten support along its 20-day moving average after pulling back slightly from its all-time high of $310. 74 on Sherwin-Williams SHW (SHW) This name is maybe familiar to anyone who s spruced up their home


The paint manufacturer and retailer is up 29. 98% ago three months. It reported earnings of $6. 48 per share in the second one quarter up 29% from the former year. Sales were down in some industrial sales although retail sales (the homebuilding and home improvement markets) gained. Newmont NEM (NEM) The gold miner reported year-over-year earnings growth of 167% in the latest quarter


The stock has been consolidating and finding support along its 10-week moving average. Despite the hot rise in gold prices Newmont is among mining firms slowing production through COVID-19-related concerns. Ecolab ECL (ECL) This company markets cleaning and sanitization products to hotels and restaurants. At the one hand those products are needed more now than ever


However Ecolab s customers were shut down through COVID or operating under restrictions. The company s earnings and sales declined at double-digit rates in the latest quarter. After a bullish moving-average crossover in July XLB climbed higher. STOCKCHARTS. COM Shares of the materials ETF gapped up in Monday s session


While rising sentiment about mergers & acquisitions activity including optimism about a COVID vaccine propelled the wider market higher there s reason to believe this sector could continue its uptrend. The ETF s chart flashed a bullish signal in July as the 50-day moving average crossed above the 200-day line. This crossover often precedes a longer uptrend although as with any investment downside trading could be offset with diversification into other sectors global regions and asset classes

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