Most technology stocks have been going in one direction in recent months, and it's not the one direction that Harry Styles' career went in. They've been going the other way -- down, for the most part.
Of course, bear markets are nothing new and many of those major technology stocks will come charging back and produce great long-term returns -- as they did coming out of the Great Recession and the pandemic. If you still believe in your technology stocks and nothing has fundamentally changed with the companies, don't sell, as you're only locking in losses.
But if you're uneasy about the losses and want to add some balance to your portfolio, consider an investment in a couple of exchange-traded funds (ETFs) that are outperforming the market right now -- the Cambria Value and Momentum ETF (VAMO -1.15%) and the IQ Global Resources ETF (GRES -1.05%).
1. Cambria Value and Momentum ETF
The Cambria Value and Momentum ETF is an actively managed ETF that's been around since 2015. This is longer than most, as active ETFs are relatively new but have been gaining momentum in recent years.
The fund management team takes a quantitative approach that ranks the entire universe of U.S. stocks by value and momentum factors. Value stocks are those considered priced below their intrinsic value, while momentum stocks are those that have price momentum. Ultimately, the top roughly 100 stocks that best meet these screens are included in the portfolio. It should be noted that the managers also employ risk controls to reduce volatility.
The top five holdings at the end of the first quarter were Matador Resources, TimkenSteel, United Natural Foods, EOG Resources, and Oasis Petroleum. It consists of 44% large caps, 47% mid caps, and 9% small caps. The median price-to-earnings (P/E) ratio is a low 7.8.
The ETF is up about 3.8% year to date and roughly 8% over the past year, as of June 29. Over the past three years and five years, it has posted annualized returns of 12.6% and 4.5%, respectively. The expense ratio is a relatively high 0.64%, given the active management. With the market in a value cycle right now, and that trend likely continuing due to rising rates, this ETF should offer some nice ballast until those tech stocks come back.
2. IQ Global Resources ETF
The IQ Global Resources ETF is a little broader than some of the sector-specific funds out there, which focus on a single sector, like energy, for example. This ETF tracks, via the IQ Global Resources Index, seven different markets under the umbrella of natural resources, including energy, grains/food/fiber, livestock, industrial metals, precious metals, timber, and water. The index uses momentum and valuation factors to identify global companies that operate in commodity-specific market segments, employing a tiered weighting approach.
The portfolio holds roughly 207 stocks, with the five largest positions in ExxonMobil, Mondelez International, BHP Group, Chevron, and Rio Tinto. About 33% of the portfolio is in energy stocks, with 23% in industrial metals, and 23% in grand/food/fiber. The P/E ratio is 17.2.
The fund is up about 3% year to date and roughly 10% over the past 12 months, as of June 29. The ETF has posted an annualized return of 15.2% over the past three years and 9.3% over the past five years, as of May 31. It's been around since 2009, so it's 10-year annualized return is 4.7%. The expense ratio is 0.30%. While energy stocks dominate the portfolio right now, it will shift, depending on the commodities that are in favor in a given cycle, based on its screens.
These two ETFs shouldn't replace any technology funds or stocks in your portfolio, as their long-term returns pale in comparison. But they will give you some balance to better navigate the market's ups and downs.