Who doesn’t like undervalued stocks or ETFs? In fact, investors hunt for stocks with a low P/E or undervalued- ones especially when the market is buoyant, as we are witnessing now.

Many market watchers are warning of a bust in the near term. This is where the search for value stocks or ETFs with typically low P/E ratios starts.

The lower the P/E of a security, the better for a value investor. This is because value investors believe that the security’s current market price is not reflective of its historical/future earnings and therefore chances of outperformance are higher.

Naturally, there are very few investors who pay attention to securities with an increasing or high P/E. But this often-overlooked trend can prove worthwhile in finding great stocks or ETFs. Let’s dig a little deeper.

Rising or High P/E: An Useful Tool Too

Investors should note that stock prices move in tandem with earnings performance. If earnings come in stronger, the price of a stock shoots up. Solid quarterly earnings and the forward guidance in turn boost earnings forecasts, leading to stronger demand for the stock and an uptrend in its price.

So, if share price is rising steadily, it means that investors are assured of the security’s fundamental strength and expect some more strong positives out of it. When these outperforming stocks or a sector makes a fund, that basket too boasts a high P/E but has further room to run.

ETFs to Tap at High P/E for Further Gains

Below we highlight a few ETFs with a high P/E (much higher than the S&P-based ETF SPY’s P/E of 18.67 times) that are still top ranked. All these ETFs beat SPY in the last six months (as of Oct 24, 2017).

Global X Social Media ETF SOCL

The fund reflects the performance of companies involved in the social media industry.

P/E: 44.12x

Rank: #1 (Strong Buy)

Beta: 0.99

Columbia India Consumer ETF INCO

The fund follows the Indxx India Consumer Index which is a maximum 30-stock free-float adjusted market capitalization-weighted indexdesigned to track the market performance of companies in the consumer industry in India (read: 4 India ETFs to Brighten Your Portfolio This Diwali).

P/E: 32.87x

Rank: #2 (Buy)

Beta: 0.98


The fund follows the S&P Internet Select Industry Index, which represents the Internet segment of the S&P Total Market Index (read: 5 Overlooked Tech ETFs Crushing XLK).

P/E: 33.36x

Rank: #2

Beta: 0.65

PowerShares Dynamic Large Cap Growth ETF PWB

The fund follows the Dynamic Large Cap Growth Intellidex Index. It invests at least 90% of its total assets in stocks forming the index which provides capital appreciation while maintaining consistent stylistically accurate exposure (read: Market Hits New Record High: Growth ETFs Top).

P/E: 26.19x

Rank: #1

Beta: 0.90

iShares US Aerospace & Defense ETF ITA

The fund’s underlying index Dow Jones U.S. Select Aerospace & Defense Index looks to track the performance of the aerospace and defense sector of the U.S. equity market.

P/E: 24.25x

Rank: #1

Beta: 0.96

Want key ETF info delivered straight to your inbox?

Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

ISHARS-US AEROS (ITA): ETF Research Reports

GLBL-X SOCL MDA (SOCL): ETF Research Reports

PWRSH-DYN LC GR (PWB): ETF Research Reports

SPDR-SP INTRNT (XWEB): ETF Research Reports

COL-INDIA CNSMR (INCO): ETF Research Reports

To read this article on Zacks.com click here.

Zacks Investment Research

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Source: Custom News Article from Zacks Investment Research for ETFHeatMap.com


Please enter your comment!
Please enter your name here