S&P Bullish On Select Industrials ETFs

S& Capital IQ has raised its recommended rating on the industrials sector to Overweight from Marketweight and in a research note, the firm highlighted three ETFs it's bullish on as ways for investors to gain exposure to industrial stocks. In S&P Capital IQ's coverage universe, the firm classifies 28 ETFs as tracking the industrials space, but the Industrial Select Sector SPDR XLI, Vanguard Industrials ETF VIS and the iShares Dow Jones US Industrial ETF IYJ along with three others are the ones that make the cut with Overweight ratings. With an expense ratio of 0.2% and $2.74 billion in assets under management, the Industrial Select Sector SPDR was modestly higher in 2011. General Electric GE, United Parcel Service UPS, United Technologies UTX, Caterpillar CAT and 3M MMM account for about 32% of that ETF's weight. IYJ has $349.4 million in AUM and fees of 0.47%. The same five stocks represent the top five holdings in IYJ, accounting for about 25% of the ETF's weight. Overall, IYJ is home to 244 stocks. With an expense ratio of 0.19%, the Vanguard Industrials ETF is the cheapest of the trio. That ETF is home to 372 stocks and the same five stocks also make up the Vanguard offering's top five holdings. VIS was down slightly last year as was IYJ. S&P Capital IQ recommends a 12% stake in industrials, relative to the S&P 500's recent 11% weighting, the firm said in the research note. The firm believes heavy industrial machinery, equipment rental, truck and truck engine manufacturing, and package delivery are all likely to benefit from increased global demand in 2012 and noted the sector is poised for outperformance as investors discount a gradual economic recovery in the U.S., as well as continued solid growth in Asia, believing European woes will remain relatively contained, according to the note.