Wall Street Favorites: 3 ETFs With Strong Buy Ratings for May 2024

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ETFs make it easier to invest in the stock market. Instead of buying individual stocks and monitoring their performances, you can get exposure to numerous holdings through an ETF.

Some ETFs track popular indices and have low expense ratios because of their passive management approach. Other funds have higher expense ratios since managers are more active in researching stocks, allocating capital across positions and adjusting the fund’s holdings more often.

Investors ultimately want positive returns from ETFs; the more, the better. Wall Street believes these ETFs are ready to soar.

Vanguard Growth Index Fund ETF (VUG)

The Vanguard Growth Index Fund ETF (NYSEARCA:VUG) prioritizes the Magnificent Seven and only has a 0.04% expense ratio. VUG has 200 stocks with a strong focus on tech. More than half of its total assets are in the tech sector, while consumer discretionary and industrials are the next two sectors. VUG has 19.10% of its holdings in the consumer discretionary sector and 8.70% of its capital in industrials.

The fund is off to a solid start with a 13% year-to-date gain. It’s also up by 117% over the past five years. The fund has achieved those gains by constructing a portfolio filled with large-cap growth stocks. The portfolio and historical returns have attracted many investors. VUG currently has more than $220 billion in net assets.

Analysts believe the fund can continue to march higher. It’s rated as a “Strong Buy” among 200 analysts with a projected 13% upside. While some analysts rated it as a “Hold,” no analyst rated VUG as a “Sell.” 

iShares Semiconductor ETF (SOXX)

The iShares Semiconductor ETF (NASDAQ:SOXX) is one of the best ways to capitalize on semiconductor stocks and the artificial intelligence boom. Nvidia (NASDAQ:NVDA) is this fund’s top holding, making up almost 10% of its total assets. Broadcom (NASDAQ:AVGO) is close behind as the second largest holding in the fund.

SOXX has outperformed the stock market for several years, and the focus on Nvidia makes it easy to see why. Shares are up by 21% year-to-date and have gained 253% over the past five years. The fund’s 0.35% expense ratio is higher than VUG but still competitive. 

The fund offers diversification in the semiconductor industry but doesn’t offer diversification beyond semiconductors. You may want to get another ETF alongside SOXX for broader diversification. While SOXX has a narrow focus, it’s worked well so far, and analysts have been assigning higher price targets. The average price target suggests a 9% upside from current levels. SOXX is rated as a “Moderate Buy.”

iShares Russell 1000 Growth ETF (IWF)

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The iShares Russell 1000 Growth ETF (NYSEARCA:IWF) exposes investors to large and mid-cap U.S. corporations. The fund has a 0.19% expense ratio and has been outperforming the stock market for a while. Shares are up by 13% year-to-date and have soared by 120% over the past five years.

Each member of the Magnificent Seven makes the fund’s top ten holdings. Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) each make up more than 10% of the fund’s total assets. If you like those two stocks and the other Magnificent stocks, this fund may make sense for you.

It certainly makes sense in the eyes of Wall Street analysts. IWF is rated as a “Strong Buy” among 442 analysts. The fund has a projected 12% upside from current levels. The fund has 440 holdings — 44.23% of its total holdings in the Information Technology sector. Consumer discretion, communication, and health care are the only other sectors with more than 10% of the fund’s total assets. It has negligible exposure to real estate, materials, energy, cash and utilities.

On this date of publication, Marc Guberti held a long position in VUG. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Marc Guberti is a finance freelance writer at InvestorPlace.com who hosts the Breakthrough Success Podcast. He has contributed to several publications, including the U.S. News & World Report, Benzinga, and Joy Wallet.

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