The Best Sector ETFs For February: Calling On Commodities

February is here, but that may not mean much to U.S. stocks. Over the past 20 years, the S&P 500 has been flat in February, posting an average win rate of 55 percent. The best February performance for the S&P 500 over those two decades came in 1998, when the benchmark U.S. equity gauge jumped 7 percent, according to EquityClock.com. 

While the track record of the S&P 500 in February is uninspired, there are sector-level opportunities available that can be best captured with exchange traded funds.

Several of the sector SPDR ETFs average February declines, but some others post solid gains in the second month of the year. Two of the best performers are levered to the commodities trade.

Magnificent Materials

Dating to 1999, the first full year of trading for the sector SPDR suite, the Materials Select Sector SPDR XLB is the best performer in February. XLB, the largest materials ETF by assets, averages a February gain of almost 2 percent, according to CXO Advisory data. 

After gaining 24 percent last year, XLB is up 4 percent to start 2018. February is one of five months in which XLB ranks as the best or second-best sector SPDR ETF on a historical basis, according to CXO.

The $5.31-billion XLB holds 25 stocks, but DowDuPont Inc. DWDP accounts for over 23 percent of the ETF's weight, more than triple the weight assigned to XLB's second-largest holding.

Energy Excellence

The Energy Select Sector SPDR XLE is usually the second-best sector SPDR in February. XLE, the largest equity-based energy ETF, averages a February gain of about 1.5 percent, according to CXO data.

After falling nearly 1 percent last year, making it one of 2017's worst-performing sector SPDRs, XLE is up 3.6 percent to start 2018. The $19.71-billion XLE holds 32 stocks, but Exxon Mobil Corp. XOM and Chevron Corp. CVX, the two largest U.S. oil companies, combine for nearly 40 percent of the ETF's weight.

XLE ranks as the second-best sector SPDR on a historical basis in February, March and April, according to CXO.

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