In this article, we discuss 10 best industrial ETFs.
Jones Lang LaSalle Incorporated (NYSE:JLL), an American real estate firm, reported that industrial markets throughout the United States displayed slower performance in 2023 compared to the previous year, given the rising inflation and economic turbulence. Initial leasing data reveals that 112.6 million leases were completed in the second quarter of 2023, marking a significant 46.9% decline in comparison to the same period last year. Even though leasing activity is currently lower than the peak seen during the pandemic, these quarterly results are more similar to the levels before the pandemic. Notably, around 50% of the leases signed in the second quarter were brand new leases, indicating a strong demand for newer industrial properties. The vacancy rate has continued to rise, reaching 4.2%, and with a wave of new properties scheduled for the third quarter, the vacancy rate is expected to keep increasing. Moreover, the rate at which new construction projects are starting has slowed down by 41.3% compared to the previous year, with only 87.9 million square feet of new projects commencing in the second quarter. This brings the total number of projects under construction to 592.9 million square feet.
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The manufacturing industry is currently experiencing a significant change as it integrates generative artificial intelligence. AI is being employed to optimize supply chains, improve quality control by identifying defects, and enhance process efficiency. Nevertheless, manufacturers are facing challenges pertaining to issues like job loss, safeguarding data, ethical dilemmas, dependability, and the ever-changing legal landscape. According to Deloitte, the manufacturing sector in the United States maintained its strong performance in 2022, further strengthening the positive trajectory it started after the pandemic and exceeding predictions from the previous two years. Policy measures like the CHIPS Act and IRA are poised to support the ongoing revival of the manufacturing sector. Projections by Deloitte, relying on Oxford Economics’ Global Economic Model, foresee a 2.5% increase in manufacturing GDP for 2023.
As per CBRE’s market outlook for industrial and logistics sectors, 2023 is supposed to bring moderation in industrial leasing activity within the United States, driven by occupiers postponing their expansion plans and a reduced need to hold excess inventory post-pandemic. Despite this deceleration, demand will remain balanced with supply during the year, leading to a 13th consecutive year of positive net absorption and steady growth in rent prices. The driving forces for this demand include the growth of e-commerce, the evolution of supply chains, and efforts to optimize location choices. CBRE noted that although there has been improvement in global supply chains, there’s still uncertainty due to potential disruptions like port backlogs, labor issues, adverse weather, and geopolitical conflicts. To counter these risks, businesses are diversifying their product sourcing, adopting strategies such as a “China Plus One” approach, where they expand beyond relying solely on China for manufacturing and labor. On a positive note, larger retailers, occupiers, and logistics companies are likely to continue expanding to strengthen their distribution capabilities despite the overall economic slowdown. However, smaller businesses lack the financial reserves to do so.
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Some of the best industrial stocks to buy include PulteGroup, Inc. (NYSE:PHM), Old Dominion Freight Line, Inc. (NASDAQ:ODFL), and Builders FirstSource, Inc. (NYSE:BLDR). However, in this article, we discuss the best ETFs which provide access to a diverse portfolio of industrial stocks.
Our Methodology
We chose ETFs that offer exposure to large-, mid- and small-cap industrial stocks to create a well-rounded list of the popular funds. We have also discussed the top holdings of the ETFs to offer better insight to potential investors. These industrial ETFs have amassed significant gains in the last 5 years. The list is ranked in ascending order of the 5-Year performance of these ETFs as of August 14, 2023.

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Best Industrial ETFs
10. Industrial Select Sector SPDR Fund (NYSE:XLI)
5-Year Performance as of August 14: 42.83%
Industrial Select Sector SPDR Fund (NYSE:XLI)’s primary objective is to achieve investment outcomes that generally correspond with the price and yield performance of the Industrial Select Sector Index. This fund aims to offer exposure to a range of industries, including aerospace and defense, industrial conglomerates, marine transportation, transportation infrastructure, machinery, air freight and logistics, commercial services and supplies, electrical equipment, construction and engineering, trading companies and distributors, and building products. Established on December 16, 1998, Industrial Select Sector SPDR Fund (NYSE:XLI) holds a portfolio of 75 stocks and offers an expense ratio of 0.10% as of August 13. It is one of the best industrial ETFs to invest in.
Caterpillar Inc. (NYSE:CAT) is the top holding of the Industrial Select Sector SPDR Fund (NYSE:XLI). Caterpillar Inc. (NYSE:CAT) is one of the largest construction equipment manufacturers in the world. On August 1, the company reported a Q2 non-GAAP EPS of $5.55 and a revenue of $17.3 billion, exceeding market expectations by $0.97 and $770 million, respectively. Revenue for the period increased 21.8% on a year-over-year basis.
According to Insider Monkey’s first quarter database, 52 hedge funds were bullish on Caterpillar Inc. (NYSE:CAT), compared to 50 funds in the prior quarter. Bill & Melinda Gates Foundation Trust is the leading position holder in the company, with 7.35 million shares worth $1.68 billion.
Like PulteGroup, Inc. (NYSE:PHM), Old Dominion Freight Line, Inc. (NASDAQ:ODFL), and Builders FirstSource, Inc. (NYSE:BLDR), Caterpillar Inc. (NYSE:CAT) is one of the top industrial stocks to invest in.
Diamond Hill Large Cap Strategy made the following comment about Caterpillar Inc. (NYSE:CAT) in its Q4 2022 investor letter:
“In the case of Caterpillar Inc. (NYSE:CAT), the company reported a better-than-expected Q3 as demand in mining, non-residential construction and energy remained healthy through the year even as recession fears grew. Caterpillar showed strong pricing power and operating efficiency in the face of supply chain constraints and labor shortages, which in turn contributed to better-than-expected share price performance.”
9. Vanguard Industrials Index Fund (NYSE:VIS)
5-Year Performance as of August 14: 44.28%
Vanguard Industrials Index Fund (NYSE:VIS) aims to replicate the performance of the Spliced U.S. Investable Market Industrials 25/50 Index, which is a benchmark index that provides exposure to industrial stocks. The ETF was introduced on September 23, 2004, and employs a strategy of passive management with complete replication. As of December 2022, Vanguard Industrials Index Fund (NYSE:VIS)’s expense ratio stands at 0.10%. Vanguard Industrials Index Fund (NYSE:VIS)’s portfolio consists of 389 stocks, and it is one of the top industrial ETFs to monitor.
RTX Corporation (NYSE:RTX) is the largest holding of Vanguard Industrials Index Fund (NYSE:VIS). RTX Corporation (NYSE:RTX) operates in the aerospace and defense sector, offering solutions to commercial, military, and government customers across the globe. The company is divided into four segments – Collins Aerospace, Pratt & Whitney, Raytheon Intelligence & Space, and Raytheon Missiles & Defense. On July 25, RTX Corporation (NYSE:RTX) reported a Q2 non-GAAP EPS of $1.29 and a revenue of $18.32 billion, outperforming Wall Street estimates by $0.11 and $620 million, respectively.
According to Insider Monkey’s first quarter database, Ken Griffin’s Citadel Investment Group is the largest position holder in RTX Corporation (NYSE:RTX), with 1.65 million shares worth $161.8 million.
Carillon Tower made the following comment about RTX Corporation (NYSE:RTX) in its Q3 2022 investor letter:
“Raytheon Technologies Corporation (NYSE:RTX) announced strong results led by strength in its commercial segment, but weakness in its defense business led to investor consternation. Management guided to a recovery in this segment, citing both transitory supply chain issues and continued strong demand.”
8. Invesco Aerospace & Defense ETF (NYSE:PPA)
5-Year Performance as of August 14: 45.51%
Invesco Aerospace & Defense ETF (NYSE:PPA)’s underlying benchmark is the SPADE Defense Index. The index tracks companies engaged in US defense, homeland security, and aerospace operations. Invesco Aerospace & Defense ETF (NYSE:PPA) was founded on October 26, 2005. As of August 11, 2023, the ETF holds a portfolio of 55 stocks and features an expense ratio of 0.58%. Invesco Aerospace & Defense ETF (NYSE:PPA) is one of the best industrial ETFs to buy.
The Boeing Company (NYSE:BA) is the largest holding of the Invesco Aerospace & Defense ETF (NYSE:PPA). It is involved in the design, production, maintenance, and assistance of commercial airplanes, military planes, satellites, defense systems for missiles, human space travel, and launch mechanisms worldwide. On July 26, The Boeing Company (NYSE:BA) reported a Q2 non-GAAP EPS of -$0.82 and a revenue of $19.75 billion, outperforming Wall Street expectations by $0.07 and $1.16 billion, respectively.
According to Insider Monkey’s first quarter database, 52 hedge funds were bullish on The Boeing Company (NYSE:BA), compared to 53 funds in the prior quarter. John Overdeck and David Siegel’s Two Sigma Advisors is a prominent stakeholder of the company, with a position worth $368.7 million.
Jackson Square Partners made the following comment about The Boeing Company (NYSE:BA) in its Q3 2022 investor letter:
“For The Boeing Company (NYSE:BA)–in short, we believe the worst of Boeing’s idiosyncratic issues are behind it, the airframe duopoly remains as protected as ever, and at current prices (where we’ve been adding), the stock is trading around ~6x FCF on 2025E. Current airframe production is running materially below expected travel demand over the next 5-10 years, creating a structural supply/demand imbalance that we believe will drive a decade of strong growth in civil aerospace from here. In our 2Q’22 correspondence, we described the attributes of our ideal growth ballast and said we hoped to convert another in the coming months – we believe Boeing checks all those boxes.”
7. First Trust Industrials/Producer Durables AlphaDEX Fund (NYSE:FXR)
5-Year Performance as of August 14: 45.99%
Next on our list of the best industrial ETFS is First Trust Industrials/Producer Durables AlphaDEX Fund (NYSE:FXR). First Trust Industrials/Producer Durables AlphaDEX Fund (NYSE:FXR)’s primary goal is to achieve investment results that align with the price and yield movements of the StrataQuant® Industrials Index. Established on May 8, 2007, First Trust Industrials/Producer Durables AlphaDEX Fund (NYSE:FXR) has an expense ratio of 0.61% as of December 2022. With net assets worth $1.75 billion as of August 11, 2023, the ETF holds 132 stocks in its portfolio.
Saia, Inc. (NASDAQ:SAIA), a trucking and transportation company in North America, is the top holding of First Trust Industrials/Producer Durables AlphaDEX Fund (NYSE:FXR). On July 28, Saia, Inc. (NASDAQ:SAIA) reported a Q2 GAAP EPS of $3.42, beating market estimates by $0.14. The revenue of $694.62 million, however, fell short of Wall Street consensus by $9.87 million.
According to Insider Monkey’s first quarter database, Saia, Inc. (NASDAQ:SAIA) was part of 20 hedge fund portfolios, with combined stakes worth $218 million. Palestra Capital Management is the biggest stakeholder of the company, with 238,903 shares valued at $65 million.
Artisan Small Cap Fund made the following comment about Saia, Inc. (NASDAQ:SAIA) in its Q1 2023 investor letter:
“Saia, Inc. (NASDAQ:SAIA) operates in a relatively attractive transportation subsector, less-than-truckload (LTL) shipping, which features several solid franchises supported by real estate assets and network advantages. Saia has been opening new terminals across the Northeast, and its terminal count has increased from 151 at the end of 2016 to 187 as of Q4 2022. Now that the Northeast expansion is largely complete, Saia is entering a new phase of growth that should unlock additional operating leverage. In addition, we believe Saia has the virtuous opportunity to grow its delivery network at a healthy pace while realizing higher prices as this strengthened network results in higher quality service levels to customers. We are very cognizant of the slowing economy and the likelihood that the industry’s (and Saia’s) shipment volumes will decline in the coming quarters. But with signs of continued strong industry discipline around pricing, we decided to start a GardenSM position in what could be a solid long-term profit cycle.”
6. Fidelity MSCI Industrials Index ETF (NYSE:FIDU)
5-Year Performance as of August 14: 46.95%
Fidelity MSCI Industrials Index ETF (NYSE:FIDU) is a US industrials-focused ETF that follows the performance of MSCI indices. It was introduced by Fidelity on October 21, 2013. At present, Fidelity MSCI Industrials Index ETF (NYSE:FIDU) maintains an expense ratio of 0.08% and has assets user management totaling $800.13 million. The fund’s portfolio consists of 392 stocks. Fidelity MSCI Industrials Index ETF (NYSE:FIDU) is one of the best industrial ETFs to buy.
Union Pacific Corporation (NYSE:UNP) is a significant holding of Fidelity MSCI Industrials Index ETF (NYSE:FIDU). Union Pacific Corporation (NYSE:UNP) operates in the US railroad sector. It provides transportation services for grains, fertilizers, food, coal, renewables, petroleum, chemicals, plastics, forest products, metals, and ores. On July 26, Union Pacific Corporation (NYSE:UNP) declared a $1.30 per share quarterly dividend, in line with previous. The dividend is payable on September 29, to shareholders of record on August 31.
According to Insider Monkey’s first quarter database, 85 hedge funds were bullish on Union Pacific Corporation (NYSE:UNP), compared to 83 funds in the preceding quarter. Eric W. Mandelblatt’s Soroban Capital Partners is the largest stakeholder of the company, with 8.26 million shares worth $1.6 billion.
In addition to PulteGroup, Inc. (NYSE:PHM), Old Dominion Freight Line, Inc. (NASDAQ:ODFL), and Builders FirstSource, Inc. (NYSE:BLDR), Union Pacific Corporation (NYSE:UNP) is one of the best industrial stocks to watch.
Madison Sustainable Equity Fund made the following comment about Union Pacific Corporation (NYSE:UNP) in its second quarter 2023 investor letter:
“Union Pacific Corporation (NYSE:UNP) released its annual Sustainability report. Highlights include improved safety metrics as a result of its comprehensive approach to safe train operations through the use of technology in combination with training of its workforce. Train derailments declined by 21% compared to 2019. The company implemented a new qualitative cybersecurity risk management system to protect from cyber events. To date, the company has not experienced any material disruption due to a cyber attack or threat. The report also highlighted its annual giving with $24 million in donations across 2,500 non-profit organizations in 2022.”
5. Invesco S&P 500® Equal Weight Industrials ETF (NYSE:RSPN)
5-Year Performance as of August 14: 65.50%
Invesco S&P 500® Equal Weight Industrials ETF (NYSE:RSPN) mirrors the performance of the S&P 500® Equal Weight Industrials Index, which evenly distributes the weight of stocks within the industrials sector of the S&P 500 Index. This ETF was introduced on November 1, 2006. As of August 11, 2023, Invesco S&P 500® Equal Weight Industrials ETF (NYSE:RSPN) offers an expense ratio of 0.40%, and its portfolio consists of 77 stocks. It is one of the best industrial ETFs to watch.
Old Dominion Freight Line, Inc. (NASDAQ:ODFL) is the largest holding of Invesco S&P 500® Equal Weight Industrials ETF (NYSE:RSPN). It is a prominent less-than-truckload (LTL) motor carrier in the United States and North America. The company specializes in providing regional, inter-regional, and national LTL services, including expedited transportation. On July 20, Old Dominion Freight Line, Inc. (NASDAQ:ODFL) declared a $0.40 per share quarterly dividend, in line with previous. The dividend is payable on September 29, to shareholders of record on September 6.
According to Insider Monkey’s first quarter database, 37 hedge funds were bullish on Old Dominion Freight Line, Inc. (NASDAQ:ODFL), compared to 34 funds in the prior quarter. Ken Griffin’s Citadel Investment Group is the largest stakeholder of the company, with 292,753 shares worth approximately $100 million.
The London Company Large Cap Strategy made the following comment about Old Dominion Freight Line, Inc. (NASDAQ:ODFL) in its first quarter 2023 investor letter:
“Old Dominion Freight Line, Inc. (NASDAQ:ODFL) – ODFL outperformed during Q1, reflecting strong operating performance in a negative freight market. ODFL has a relentless focus on service and quality, which resonates with customers in good times and bad. Management’s focus on cost containment this quarter resulted in record levels of profitability, and the company continues to execute on its long-term growth plan. ODFL is widely held as one of the best franchises in transportation.”
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4. Invesco DWA Industrials Momentum ETF (NASDAQ:PRN)
5-Year Performance as of August 13: 69.66%
Invesco DWA Industrials Momentum ETF (NASDAQ:PRN) follows the performance of the Dorsey Wright® Industrials Technical Leaders Index. This ETF was established on October 12, 2006. As of August 11, 2023, the net expense ratio for The Invesco DWA Industrials Momentum ETF came in at 0.60%. The fund’s portfolio comprises 45 stocks.
Builders FirstSource, Inc. (NYSE:BLDR) is a prominent holding of Invesco DWA Industrials Momentum ETF (NASDAQ:PRN). Builders FirstSource, Inc. (NYSE:BLDR) manufactures and markets building materials, manufactured elements, and construction services across the United States. On August 2, Builders FirstSource, Inc. (NYSE:BLDR) reported a Q2 non-GAAP EPS of $3.89 and a revenue of $4.53 billion, outperforming Wall Street expectations by $1.30 and $290 million, respectively.
According to Insider Monkey’s first quarter database, Builders FirstSource, Inc. (NYSE:BLDR) was part of 51 hedge fund portfolios, compared to 52 in the last quarter. Ben Jacobs’ Anomaly Capital Management is the largest stakeholder of the company, with 1.5 million shares worth $137.4 million.
Black Bear Value Partners made the following comment about Builders FirstSource, Inc. (NYSE:BLDR) in its first quarter 2023 investor letter:
“Builders FirstSource, Inc. (NYSE:BLDR) is a manufacturer and supplier of building materials with a focus on residential construction. Historically this business was cyclical with minimal pricing power as the primary products sold were lumber and other non-value-add housing materials. Since the GFC, BLDR has focused on growing their value-add business that is now 40%+ of the topline. The company has modest leverage and has been using their abundant free-cash-flow to buy in over 30% of the stock in the last 18 months.
While mortgage rates are higher, they are not unusual versus history. The low rates of the last 5-10 years are the outlier. We have a structural shortage of housing in the USA. With existing homeowners locked into low rate mortgages, the aspiring homeowner may increasingly need to find a home from a homebuilder. The next 6-12 months could be rocky as people adjust to the increase in pricing and rates. Eventually the housing market should adjust to the new normal (or rates could go down).
Normalized free-cash-flow per share looks to be in the range of $8-$12 per year. At quarter end pricing of ~$89 that implies a free-cash-flow yield of 9-13%. If we owned this business privately and someone offered us this annual cash-flow yield, we would be jumping at it!”
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3. Invesco Dynamic Building & Construction ETF (NYSE:PKB)
5-Year Performance as of August 14: 81.07%
Invesco Dynamic Building & Construction ETF (NYSE:PKB) tracks the progress of the Dynamic Building & Construction Intellidex Index. This index is composed of 30 American building and construction stocks. Established on October 26, 2005, Invesco Dynamic Building & Construction ETF (NYSE:PKB) currently holds a portfolio of 31 stocks and features an expense ratio of 0.57% as of August 11, 2023. It is one of the best industrial ETFs to invest in.
PulteGroup, Inc. (NYSE:PHM) is the top holding of Invesco Dynamic Building & Construction ETF (NYSE:PKB). It is primarily involved in the homebuilding sector within the United States. The company provides a range of home designs, encompassing single-family detached houses, townhomes, condominiums, and duplexes. On July 25, PulteGroup, Inc. (NYSE:PHM) reported a Q2 GAAP EPS of $3.21 and a revenue of $4.19 billion, outperforming Wall Street estimates by $0.71 and $170 million, respectively.
According to Insider Monkey’s first quarter database, 36 hedge funds were long PulteGroup, Inc. (NYSE:PHM), compared to 30 funds in the last quarter. Harris Associates is the largest stakeholder of the company, with 5.7 million shares worth roughly $335 million.
Here is what Miller Value Partners specifically said about PulteGroup, Inc. (NYSE:PHM) in its Q2 2022 investor letter:
“Homebuilders and financials, the worst losers during the Financial Crisis crash, plummeted. Some homebuilders, like PulteGroup, Inc. (NYSE:PHM), traded down to half their financial crisis lows despite reporting housing improvements for the first time. Fear ruled in the short term, but fundamentals ultimately prevailed. Homebuilders were top performers in 2012 posting triple-digit increases in some cases. Opportunity Equity was a top performer that year.”
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2. Invesco Water Resources ETF (NASDAQ:PHO)
5-Year Performance as of August 14: 82.33%
Invesco Water Resources ETF (NASDAQ:PHO) tracks the performance of the NASDAQ OMX US Water Index. This index aims to monitor the progress of US-listed firms that are involved in water conservation and purification in residential, commercial, and industrial settings. Established on June 12, 2005, Invesco Water Resources ETF (NASDAQ:PHO) offers an expense ratio of 0.59% and holds a portfolio of 39 stocks as of August 11. It is one of the best industrial ETFs to monitor.
Ecolab Inc. (NYSE:ECL) is the largest holding of Invesco Water Resources ETF (NASDAQ:PHO).Ecolab Inc. (NYSE:ECL) provides solutions and services for water management, hygiene, and infection prevention worldwide. The company’s operations are divided into three segments – Global Industrial, Global Institutional & Specialty, and Global Healthcare & Life Sciences. On August 3, Ecolab Inc. (NYSE:ECL) declared a $0.53 per share quarterly dividend, in line with previous. The dividend is distributable on October 16, to shareholders of record on September 19.
According to Insider Monkey’s first quarter database, 53 hedge funds were bullish on Ecolab Inc. (NYSE:ECL), compared to 47 funds in the prior quarter. Bill & Melinda Gates Foundation Trust held the largest position in the company, comprising 5.2 million shares worth $863.7 million.
Madison Sustainable Equity Fund made the following comment about Ecolab Inc. (NYSE:ECL) in its second quarter 2023 investor letter:
“Ecolab Inc. (NYSE:ECL) is benefiting from price increases put in place last year to offset inflationary pressures. The price increases more than offset flattish volumes and are modestly ahead of raw material inflation resulting in a return to earnings growth. We believe that Ecolab’s profitability will improve going forward from market share gains and its fast-growing bioprocessing business.”
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1. First Trust RBA American Industrial RenaissanceTM ETF (NASDAQ:AIRR)
5-Year Performance as of August 13: 98.98%
First Trust RBA American Industrial RenaissanceTM ETF (NASDAQ:AIRR) aims to achieve investment outcomes that generally mirror the price and yield performance of the Richard Bernstein Advisors American Industrial Renaissance® Index. Established on March 10, 2014, the ETF offers an expense ratio of 0.70%. As of August 11, 2023, First Trust RBA American Industrial RenaissanceTM ETF (NASDAQ:AIRR)’s portfolio comprises 49 stocks. It is one of the best ETFs to buy.
Sterling Infrastructure, Inc. (NASDAQ:STRL) is the largest holding of First Trust RBA American Industrial RenaissanceTM ETF (NASDAQ:AIRR). Sterling Infrastructure, Inc. (NASDAQ:STRL) is involved in e-infrastructure, transportation, and construction solutions, focusing on the United States market. On August 7, Sterling Infrastructure, Inc. (NASDAQ:STRL) reported a Q2 GAAP EPS of $1.27, beating market consensus by $0.34. The revenue increased 13.1% year-over-year to $522.3 million.
According to insider Monkey’s first quarter database, 17 hedge funds were bullish on Sterling Infrastructure, Inc. (NASDAQ:STRL), compared to 19 funds in the preceding quarter. Chuck Royce’s Royce & Associates is the leading stakeholder of the company, with 512,419 shares worth $19.4 million.
Here is what Wasatch Micro Cap Value Fund has to say about Sterling Infrastructure, Inc. (NASDAQ:STRL) in its Q1 2021 investor letter:
“The first is Sterling Construction Co., Inc. (STRL), which specializes in higher-margin work on highways, bridges, airports, water and sewer facilities, light-rail projects, flat concrete for subdivisions and foundations for data centers. For companies such as Sterling, we like to look at a metric known as EV (enterprise value) to EBITDA. Sterling’s EV to EBITDA ratio is about 7, which we think is inexpensive compared to competitors. Moreover, we believe the stock could benefit not only from increased construction business but also from investors’ willingness to accept a much higher EV to EBITDA ratio.”
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