In this article, we discuss the 10 growth ETFs to buy now.
Predictions of an impending recession at the US stock market are gathering pace on Wall Street even as a series of economic indicators paint a contrasting picture. Data from the Labor Department, released in early April, reveals that the US economy added nearly half a million jobs in March as the unemployment rate dropped to a record low of 3.8%. Meanwhile, the Dow Jones Industrial Average, a price-weighted index that tracks the performance of 30 large-cap firms trading on US markets, is just 6% off a record high.
A report from Brookings Institution, an American research group, claims that households in the US accumulated nearly $2.5 trillion in excess savings during the pandemic. However, market experts are skeptical of the sustainability of this growth. Lawrence Summers, a former Treasury Secretary, recently authored an opinion piece in news publication The Washington Post in which he stressed that the economic conditions in the US were “undeniably reminiscent” of previous pre-recession periods in history.
Summers underlined that whenever inflation had exceeded 4% and the unemployment rate had gone below 5%, the US economy, over the past seventy-five years, had always shrunk into a recession within two years. Data from the Bureau of Labor Statistics indicates that inflation is nearly touching 8% while the unemployment rate has dropped down to around 3.6%. Per the former official, there was an 80% chance of a recession in the US. The concerns around such a market slowdown have resulted in a mass exodus from growth stocks towards value plays.
Recession Fears Could Spark Growth Stocks Back to Life
As the Federal Reserve fights to tame inflation, some investors have picked up on the accelerating slump in the growth industry and are now looking to pick up the shares of growth firms at bargain prices. The benchmark S&P 500, heavily dominated by growth firms, is down 5% so far this year. The Russell 1000 Growth Index is down nearly 11% year-to-date. The perception is that rising interest rates will erode cash flows for growth firms, tilting the market even more in favor of value equities.
One key factor which could play a decisive role in this game is the policies of the Fed if the rise in interest rates continues to slow down the economy. In such a scenario, investors could look towards growth stocks for profit keeping the broader economic situation in mind. Esty Dwek, the chief investment officer at FlowBank, told news agency Reuters recently that as fears of the recession grow, there was going to be a “big shift away from value stocks”. FlowBank is one of the investment firms doubling down on their growth bets during this lean period.
Investors who want to prepare their portfolios for the upcoming market volatility should consider investing in some growth exchange-traded funds that offer a lot of benefits that growth equities offer but also lower the overall risk associated with some of these equities. Some of the top holdings of retirement ETFs popular in the US include Tesla, Inc. (NASDAQ:TSLA), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT), among others discussed in detail below.
Our Methodology
The ETFs listed below are discussed with regards to their top holdings. The aim of the article is to provide readers with a basic rundown of some of the top growth ETFs in the US. All the ETFs listed below trade on exchanges in the United States.
Photo by Adam Nowakowski on Unsplash
Growth ETFs to Buy Now
10. Invesco QQQ Trust (NASDAQ:QQQ)
Invesco QQQ Trust (NASDAQ:QQQ) is a fund that tracks the performance of the NASDAQ-100 Index. The index comprises 100 of the biggest non-financial companies trading on exchanges in the United States. The securities in the fund are held in the almost same proportion as their weighting on the index.
One of the biggest holdings of Invesco QQQ Trust (NASDAQ:QQQ) is Meta Platforms, Inc. (NASDAQ:FB), a diversified technology company. At the end of the fourth quarter of 2021, 224 hedge funds in the database of Insider Monkey held stakes worth $31.8 billion in Meta Platforms, Inc. (NASDAQ:FB), compared to 248 in the preceding quarter worth $38.5 billion.
Just like Tesla, Inc. (NASDAQ:TSLA), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT), Meta Platforms, Inc. (NASDAQ:FB) is one of the growth stocks on the radar of elite investors.
In its Q4 2021 investor letter, Boyar Value Group, an asset management firm, highlighted a few stocks and Meta Platforms, Inc. (NASDAQ:FB) was one of them. Here is what the fund said:
“Corporate executives can have many different reasons for selling shares (anticipation of tax law changes, philanthropy, diversification, and much more), but the sheer number of billionaire founders who sold shares in 2021 should raise eyebrows and might well be signaling a market top. Bloomberg’s Ben Steverman and Scott Carpenter report not only that Mark Zuckerberg of Meta Platforms, Inc. (NASDAQ:FB) (formerly known as Facebook) sold shares in his company almost every day last year but also that the founders of Google sold ~$3.5 billion worth of stock (the first time either Sergey Brin or Larry Page has sold shares since 2017).”
9. Vanguard Growth Index Fund (NYSE:VUG)
Vanguard Growth Index Fund (NYSE:VUG) is an exchange traded fund that invests in sectors which tend to grow more quickly than the broader market. The fund focuses on large-cap growth stocks that may underperform the market in the short-term.
A premier holding of Vanguard Growth Index Fund (NYSE:VUG) is Alphabet Inc. (NASDAQ:GOOG), a firm that owns and runs various products and platforms related to the tech world. Among the hedge funds being tracked by Insider Monkey, London-based investment firm TCI Fund Management is a leading shareholder in Alphabet Inc. (NASDAQ:GOOG) with 2.9 million shares worth more than $8.5 billion.
In its Q4 2021 investor letter, Vulcan Value Partners, an asset management firm, highlighted a few stocks and Alphabet Inc. (NASDAQ:GOOG) was one of them. Here is what the fund said:
“In contrast, we made a different kind of mistake about a decade ago. Google, now Alphabet Inc. (NASDAQ:GOOG), performed very well for us while we owned it. The company kept outperforming our assumptions and we kept lowering them to be conservative. “Trees do not grow to the sky.” The stock kept going up and our value grew but did not keep pace with the stock. It hit our estimate of fair value and we sold it with a nice gain, patting ourselves on the back. We kept following Alphabet Inc. (NASDAQ:GOOG) and what they actually did over the next several years was roughly double the assumptions we used to value it. Therefore, our value was too conservative, and we sold it too cheaply, missing many years of compounding. Fortunately, we experienced some volatility several years ago that allowed us to purchase Alphabet Inc. (NASDAQ:GOOG) (Google) again with a margin of safety.”
8. iShares Russell 1000 Growth ETF (NYSE:IWF)
iShares Russell 1000 Growth ETF (NYSE:IWF) is an exchange traded fund that tracks the performance of an index which comprises large and mid-cap US-based firms that exhibit growth characteristics. The fund invests at least 80% of net assets in these stocks.
A key holding of the iShares Russell 1000 Growth ETF (NYSE:IWF) is Visa Inc. (NYSE:V), a payments technology firm. At the end of the fourth quarter of 2021, 142 hedge funds in the database of Insider Monkey held stakes worth $29 billion in Visa Inc. (NYSE:V), compared to 143 in the preceding quarter worth $26 billion.
In its Q4 2021 investor letter, Artisan Partners, an asset management firm, highlighted a few stocks and Visa Inc. (NYSE:V) was one of them. Here is what the fund said:
“We initiated two new positions in Q4, adding Visa. Visa Inc. (NYSE:V) is a global payments company and is one of the four major US credit card networks (along with Mastercard, American Express and Discover). Visa is accepted at over 80 million merchant locations in 200 countries, interacts with 15 thousand financial institutions and processed 165 billion transactions with $13 trillion of payments and cash volume in the 12-month period ending September 2021. We have always admired Visa’s business, but its valuation prevented it from getting over the hurdle and into the portfolio. As of late, the stock has been caught up in indiscriminate selling as part of a larger unwind trade in a richly valued fintech space. Concerns also exist about Visa’s slowdown in cross-border transactions due to COVID and its net-revenue sharing arrangements with Amazon. This created an opportunity to purchase a very highquality business that benefits from substantial barriers to entry, network effects and several structural growth drivers, including consumer spending growth, the shift from cash to card, increasing ecommerce penetration, market share growth and global expansion. We believe Visa Inc. (NYSE:V) has a long runway for revenue growth as cash and checks continue to lose share. Consumers can’t use cash and checks online, after all. From a “safer” perspective, the company has a rocksolid balance sheet and has a high conversion of net income to free cash flow, which it uses for share repurchases, dividend growth and tuck-in acquisitions.”
7. Vanguard Information Technology Index Fund (NYSE:VGT)
Vanguard Information Technology Index Fund (NYSE:VGT) is an exchange traded fund that invests in securities on the MSCI US Investable Market Index/Information Technology 25/50. The index comprises firms working in the information technology sector in the US.
Vanguard Information Technology Index Fund (NYSE:VGT) holds a large stake in Intel Corporation (NASDAQ:INTC), a firm that makes and sells semiconductor products. Among the hedge funds being tracked by Insider Monkey, Boston-based investment firm Baupost Group is a leading shareholder in Intel Corporation (NASDAQ:INTC) with 18 million shares worth more than $928 million.
In its Q4 2021 investor letter, Davis Funds, an asset management firm, highlighted a few stocks and Intel Corporation (NASDAQ:INTC) was one of them. Here is what the fund said:
“Within technology and communication services, we own a number of online businesses and semiconductor related companies, including Alphabet, Amazon, Intel Corporation (NASDAQ:INTC), Applied Materials and Texas Instruments. Within the realm of high technology, we believe that leadership positions reflect enduring and widening competitive advantages over smaller competitors, with few exceptions. This is because online businesses, as well as semiconductor companies, benefit from economies of scale. An online search and advertising engine will, in general, be more profitable per unit of cost as it grows larger in terms of users and advertising dollars. It is a hub-and-spoke model, in other words, where it is generally not necessary to grow expenses at the same rate that revenues grow beyond a certain threshold. Therefore, returns on capital tend to be higher, the larger and more dominant the online search company is.”
6. Technology Select Sector SPDR Fund (NYSE:XLK)
Technology Select Sector SPDR Fund (NYSE:XLK) is an exchange traded fund that tracks the performance of an index which comprises the common stocks of companies that work in high growth sectors like software, semiconductors, and technology.
Technology Select Sector SPDR Fund (NYSE:XLK) holds a large stake in NVIDIA Corporation (NASDAQ:NVDA), a visual computing firm. At the end of the fourth quarter of 2021, 110 hedge funds in the database of Insider Monkey held stakes worth $10.4 billion in NVIDIA Corporation (NASDAQ:NVDA), compared to 83 in the preceding quarter worth $10 billion.
Along with Tesla, Inc. (NASDAQ:TSLA), Apple Inc. (NASDAQ:AAPL), and Microsoft Corporation (NASDAQ:MSFT), NVIDIA Corporation (NASDAQ:NVDA) is one of the growth stocks that hedge funds are buying.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and NVIDIA Corporation (NASDAQ:NVDA) was one of them. Here is what the fund said:
“During the fourth quarter, the ClearBridge Global Growth Strategy outperformed its MSCI ACWI benchmark. The Strategy delivered gains across eight of the nine sectors in which it was invested (out of 11 total), with the information technology (IT) and industrials sectors the primary contributors. The communication services sector was the sole detractor. Spare some time to check the fund’s top 5 holdings to have a clue about their top bets for 2022. Bucking the headwinds among our emerging growth names was NVIDIA Corporation (NASDAQ:NVDA), which saw continued sales momentum from their leadership positions in the key growth areas of graphics processing units for gaming and data centers.”
5. iShares S&P 500 Growth ETF (NYSE:IVW)
iShares S&P 500 Growth ETF (NYSE:IVW) is an exchange traded fund that invests exclusively in large-cap stocks that exhibit growth characteristics. The fund invests at least 80% of net assets in securities of this type. The other 20% may be invested in futures, options and swap contracts, cash and cash equivalents.
A premier holding of the iShares S&P 500 Growth ETF (NYSE:IVW) is PayPal Holdings, Inc. (NASDAQ:PYPL), a payments technology company. At the end of the fourth quarter of 2021, 110 hedge funds in the database of Insider Monkey held stakes worth $9.9 billion in PayPal Holdings, Inc. (NASDAQ:PYPL), compared to 123 in the preceding quarter worth $12.8 billion.
In its Q4 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and PayPal Holdings, Inc. (NASDAQ:PYPL) was one of them. Here is what the fund said:
“PayPal Holdings, Inc. (NASDAQ:PYPL), a platform and provider of digital and mobile payment services through brands including Venmo, enhances our exposure to digital payments, e-commerce, and fintech; nascent markets with penetration rates accelerating globally. The pandemic pulled forward the growth of digital payments, which was further accelerated by PayPal’s entrance into cryptocurrency and buy now, pay later (BNPL). Shares recently declined 40% from their 52-week high due to competitive concerns and disruptions to consumer spending, providing an attractive entry point. PayPal Holdings, Inc. (NASDAQ:PYPL) is trading at its pre-pandemic multiple while its long-term growth drivers remain intact and it has increased innovation at both Venmo and core PayPal Holdings, Inc. (NASDAQ:PYPL), adding new experiences around shopping and investing that we expect to positively contribute to growth in users and average revenue per user over the next five years.”
4. Schwab U.S. Large-Cap Growth ETF (NYSE:SCHG)
Schwab U.S. Large-Cap Growth ETF (NYSE:SCHG) is an exchange traded fund that invests in companies on the Dow Jones US Large-Cap Growth Total Stock Market Index. The index comprises 750 of the largest growth firms in the US.
Schwab U.S. Large-Cap Growth ETF (NYSE:SCHG) holds a large stake in Microsoft Corporation (NASDAQ:MSFT), a Washington-based tech giant. Among the hedge funds being tracked by Insider Monkey, Washington-based investment firm Fisher Asset Management is a leading shareholder in Microsoft Corporation (NASDAQ:MSFT) with 26.8 million shares worth more than $9 billion.
In its Q4 2021 investor letter, Vulcan Value Partners, an investment management firm, highlighted a few stocks and Microsoft Corporation (NASDAQ:MSFT) was one of them. Here is what the fund said:
“Microsoft Corporation (NASDAQ:MSFT) was a material contributor during the quarter. It is one of the highest quality companies in the world. We believe it has tremendous competitive advantages in its consumer and commercial Microsoft Office products as well as in its server and tools and Azure divisions. Over the last several years, Microsoft Corporation (NASDAQ:MSFT) has been implementing a successful transition from a traditional software license and maintenance revenue model to a subscription revenue model. The company remains competitively entrenched, produces strong free cash flow, and has a strong balance sheet.”
3. Vanguard Small Cap Growth Index Fund (NYSE:VBK)
Vanguard Small Cap Growth Index Fund (NYSE:VBK) is an exchange traded fund that invests at least 80% of net assets in companies on the CRSP US Small Cap Growth Index. The index comprises small-cap firms in the US that exhibit growth characteristics.
One of the biggest holdings of the Vanguard Small Cap Growth Index Fund (NYSE:VBK) is Avantor, Inc. (NYSE:AVTR), a chemicals and materials firm. Among the hedge funds being tracked by Insider Monkey, Connecticut-based investment firm Viking Global is a leading shareholder in Avantor, Inc. (NYSE:AVTR) with 8.7 million shares worth more than $370 million.
In its Q3 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Avantor, Inc. (NYSE:AVTR) was one of them. Here is what the fund said:
“Avantor, Inc. (NYSE:AVTR), which distributes proprietary, higher-margin consumables products to life science research companies, has benefited from accretive research & development as well as paying down debt, which has contributed to increased margins and strong stock performance.”
2. Vanguard Mega Cap Growth Index Fund (NYSE:MGK)
Vanguard Mega Cap Growth Index Fund (NYSE:MGK) is an exchange traded fund that invests at least 90% of total assets in securities on an index that measures the equity market performance of mega-capitalization growth stocks in the US.
A flagship holding of the Vanguard Mega Cap Growth Index Fund (NYSE:MGK) is Apple Inc. (NASDAQ:AAPL), a firm that makes and sells consumer electronics. At the end of the fourth quarter of 2021, 134 hedge funds in the database of Insider Monkey held stakes worth $186 billion in Apple Inc. (NASDAQ:AAPL), up from 120 in the previous quarter worth $146 billion.
In its Q4 2021 investor letter, Berkshire Hathaway highlighted a few stocks and Apple Inc. (NASDAQ:AAPL) was one of them. Here is what the fund said:
“Apple Inc. (NASDAQ:AAPL) – our runner-up Giant as measured by its year end market value – is a different sort of holding. Here, our ownership is a mere 5.55%, up from 5.39% a year earlier. That increase sounds like small potatoes. But consider that each 0.1% of Apple’s 2021 earnings amounted to $100 million. We spent no Berkshire funds to gain our accretion. Apple’s repurchases did the job. It’s important to understand that only dividends from Apple are counted in the GAAP earnings Berkshire reports – and last year, Apple paid us $785 million of those. Yet our “share” of Apple’s earnings amounted to a staggering $5.6 billion. Much of what the company retained was used to repurchase Apple Inc. (NASDAQ:AAPL) shares, an act we applaud. Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple Inc. (NASDAQ:AAPL) products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well.”
1. iShares Core S&P U.S. Growth ETF (NYSE:IUSG)
iShares Core S&P U.S. Growth ETF (NYSE:IUSG) is an exchange traded fund that tracks the investment returns of an index which comprises a basket of US-based stocks in the mid-cap and large-cap range which exhibit growth characteristics.
One of the top holdings of the iShares Core S&P U.S. Growth ETF (NYSE:IUSG) is Tesla, Inc. (NASDAQ:TSLA), a firm that markets electric vehicles and clean energy solutions. At the end of the fourth quarter of 2021, 91 hedge funds in the database of Insider Monkey held stakes worth $12.9 billion in Tesla, Inc. (NASDAQ:TSLA), compared to 60 in the previous quarter worth $10.6 billion.
Here is what ClearBridge Investments had to say about Tesla, Inc. (NASDAQ:TSLA) in its Q4 2021 investor letter:
“Within the growth universe we target, emerging growth stocks – the category with the highest revenue growth rates – significantly underperformed the overall growth categories in 2021 after leading performance in 2020. The pull-through effect on digitization, online access across industries, and spending to modernize outdated corporate infrastructures accelerated trends in a highly compressed time frame. Much of that trend slackened in 2021 and shares of these companies, while showing good top-line growth, saw slowing appreciation from the blistering pace in the prior year. With that moderating growth, multiples decelerated from 2020 highs. Bucking the headwinds among our emerging growth names was Tesla, Inc. (NASDAQ:TSLA) which saw continued sales momentum from their leadership positions in the key growth areas of electric vehicles.”
You can also take a peek at 10 Green Energy Stocks to Watch As Europe Cuts Reliance on Russia and 12 Best Artificial Intelligence Stocks To Invest In Right Now.
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Disclosure. None. 10 Growth ETFs to Buy Now is originally published on Insider Monkey.
