Investors continue to weather the market storms as volatility has become the norm. Selling is rampant, frightening investors with the uncertainty. Naturally, they’re seeking safety.
But money is flowing into certain sectors, which I’ll show you in a bit. First, let’s talk about Big Money – what it is, how it moves markets, and what it’s been doing lately.
Markets and Big Money in the Last 6 Months
My research firm, MAPsignals, measures Big Money investor activity. That includes institutions, pension funds, big individual investors, and so on. Our research shows Big Money moves markets. And right now, Big Money has been selling stocks and ETFs, driving markets downward:
That’s making major indices dip along with the Big Money Index (BMI), which is a 25-day moving average of large-scale investor buy and sell activity. It’s nosedived recently and could be headed for more of the same:
In the face of uncertainty, investors seek safety. It’s coming in certain sectors, like energy, staples, utilities, and other traditionally defensive areas. Given these conditions, we’ve identified some ETFs we think have great long-term potential: IYE, FCG, FTXG, FXU, and XLP.
Long-term investors should look for ETFs (and their stocks), with great setups. Remember, ETFs are just baskets of stocks, so we need to look at them in detail. MAPsignals specializes in scoring more than 6,500 stocks daily. If I know which stocks compose the ETFs, I can apply stock scores to the ETFs. Then I can rank them all from strongest to weakest.
Let’s get to the five best ETF opportunities for June 2022.
iShares U.S. Energy ETF (IYE) Analysis
The current geopolitical situation has brought oil and gas back to the forefront while driving up prices for energy. As you can see, Big Money has been buying IYE in chunks over the past year, with heavy buying starting in October 2021 and really ramping up this year:
IYE holds several big stocks. One example is Occidental Petroleum Corp. (OXY), which has 1-year sales growth of 51.5% and a profit margin of 10.7%. Investing legend Warren Buffett recently announced a big stake in OXY too. Here is the one-year Big Money action for OXY:
First Trust Natural Gas ETF (FCG) Analysis
Natural gas is seen by some as a bridge energy source between fossil fuels and cleaner sources like wind, partly because of its ample supply. As global energy markets continue to shift, natural gas is becoming more popular. Big Money has been buying too, which always helps:
One great stock FCG holds is Coterra Energy Inc. (CTRA). This independent oil and gas company has seen big three-year sales growth of 41.5% and sports a profit margin of 31.6%. Earnings have been strong too, growing 106% over three years. The Big Money is jumping in on CTRA:
First Trust NASDAQ Food & Beverage ETF (FTXG) Analysis
We can always count on food demand, right? It’s biological. Well, in all seriousness, global demand for food as well as the products and services used to create it is strong and made stronger by geopolitical issues. That’s reflected in FTXG. While there have been some dips, the trend on this one points up:
A fantastic stock within FTXG is Archer-Daniels-Midland Company (ADM), the food processor and producer of agricultural commodities. It’s rocketed since the new year, which isn’t surprising given its growing sales (one-year sales growth of 32.4%) and three-year EPS growth of 19.1%. ADM has been drawing in lots of Big Money:
First Trust Utilities AlphaDEX Fund (FXU) Analysis
When investors seek safety, that often means utilities that pay dividends. As always with ETFs, fundamental strength within underlying assets is a high priority. We see that with FXU, which has peaks and valleys along the way, but an overall positive trajectory:
One rock-solid dividend stock within this ETF is NRG Energy, Inc. (NRG), an energy producer, seller, and distributor. Big Money has been all over it recently, with nine buy signals in the last month alone. NRG grew sales in one year by 200% and EPS by 314% over three years. It pays a nearly 3.1% current dividend and has jumped in price significantly since a year ago:
Consumer Staples Select Sector SPDR ETF (XLP) Analysis
It’s rare to get excited about consumer staples, but it’s justified right now. XLP holds huge household names and has seen Big Money lifting its price recently. It’s clear that in the past year, buying at the low points has worked out:
One great stock in XLP is Costco Wholesale Corporation (COST), the bulk warehouse retailer. COST is fundamentally strong – it has one-year sales growth of 17.5% and a three-year EPS growth rate of 16.7%. But it’s down 24% this year so far. However, it wouldn’t surprise me to see this one rise again (it’s had 48 Top 20 Big Money buy signals since 1991):
Here’s a Big Money recap:
- When Big Money buying heats up, stocks and ETFs tend to rise
- Deep selling on great quality can be a phenomenal opportunity
- Repeated buying usually means outsized gains
Bottom Line and Explanatory Video
IYE, FCG, FTXG, FXU, and XLP are my top ETFs for June 2022. They cover mostly defensive sectors where money is flowing in as investors seek shelter. These picks can rise higher, in my opinion, largely because they each hold great stocks. With markets rocky, safety is at a premium, and these ETFs are proving to be havens right now.
To learn more about MAPsignals’ Big Money process please visit: www.mapsignals.com
Disclosure: the author holds no positions in IYE, FCG, FTXG, FXU, XLP, OXY, CTRA, ADM, or NRG in at the time of publication, but holds long positions in COST in managed accounts.