In this article, we discuss 15 diversified sector and international ETFs to buy. If you want to see more ETFs in this selection, check out Diversified Stock Portfolio: 5 Sector ETFs and International ETFs to Buy.
Many experts believe 2023 will witness even more fluctuations in the markets than last year, with the presence of factors such as high inflation levels, job cuts by technology companies, increasing interest rates, and international uncertainties. As a result, investors will be seeking methods to minimize risk and broaden their investment portfolios. Christopher Huemmer, senior investment strategist at FlexShares ETFs, told Fox Business on February 6:
“The biggest driver investors need to prepare for in the upcoming year is volatility. We have seen an increase in the number of volatility spikes across both equity and fixed-income markets.”
As per Huemmer, ETFs as an investment vehicle do not guarantee the reduction of portfolio risk by themselves. However, the advancements in the design of ETFs and the indexes they track offer the potential for investors to manage their risk. He highlighted that one such approach could be a focus on quality, low-risk stocks which can be easily incorporated into an investor’s equity allocation. This strategy aims to provide some protection against losses while still allowing the investor to remain invested in the equity markets.
Morgan Stanley, which played a crucial role in the establishment of the ETF industry, is making its return to the segment after 30 years. This could mark a significant moment for the investment community. Morgan Stanley’s return to the ETF industry could have a major impact on the $6.9 trillion US ETF market. Previously, there were only a small number of major financial institutions without a presence in the industry, including Capital Group and Dimensional Fund Advisors. However, Morgan Stanley stands out with its control of approximately $5.5 trillion of assets through its wealth and investment management divisions, including billions invested in ETFs. The possibility that some of these assets could be redirected to its own ETFs increases the likelihood of Morgan Stanley quickly becoming a disruptive force in the industry. Anthony Rochte, Morgan Stanley’s global head of ETFs, told Bloomberg on February 1:
“This is the first step in a series of launches. While we’re focusing on the US, we’re certainly working on a parallel launch in Europe down the road.”
Some of the stocks that diversified ETFs offer exposure to include Alibaba Group Holding Limited (NYSE:BABA), Novo Nordisk A/S (NYSE:NVO), and ASML Holding N.V. (NASDAQ:ASML).
Our Methodology
We selected the consensus picks of credible websites like Forbes, CNBC, and Bloomberg, selecting the most popular US sector ETFs, micro-cap ETFs, and international/foreign ETFs for this list.
Photo by Adam Nowakowski on Unsplash
Diversified Stock Portfolio: Sector ETFs and International ETFs to Buy
15. Energy Select Sector SPDR Fund (NYSE:XLE)
Energy Select Sector SPDR Fund (NYSE:XLE) seeks to provide investment results that correspond generally to the price and yield performance of the Energy Select Sector Index. The ETF is composed of stocks of companies that are listed on the S&P 500 Index and classified as being part of the energy sector. Energy Select Sector SPDR Fund (NYSE:XLE) was established on December 16, 1998, with 23 stocks in its portfolio as of February 9, 2023. The gross expense ratio came in at 0.10%. The fund’s distribution yield stood at 3.68%, with a quarterly distribution frequency.
Exxon Mobil Corporation (NYSE:XOM) is the largest position in Energy Select Sector SPDR Fund (NYSE:XLE)’s portfolio, representing nearly 24% of the total holdings. On January 31, Exxon Mobil Corporation (NYSE:XOM) declared a $0.91 per share quarterly dividend, in line with previous. The dividend is distributable on March 10, to shareholders of record on February 14. The company also boosted and prolonged its share-buyback plan, with a potential total of $35 billion worth of shares to be repurchased between 2023 and 2024.
According to Insider Monkey’s third quarter database, 75 hedge funds were bullish on Exxon Mobil Corporation (NYSE:XOM), compared to 72 funds in the preceding quarter. Rajiv Jain’s GQG Partners held the biggest stake in the company, nearly worth $3 billion.
Like Alibaba Group Holding Limited (NYSE:BABA), Novo Nordisk A/S (NYSE:NVO), and ASML Holding N.V. (NASDAQ:ASML), Exxon Mobil Corporation (NYSE:XOM) is one of the most popular stocks for a diversified stock portfolio.
In its Q2 2022 investor letter, First Eagle Investments, an asset management firm, highlighted a few stocks and Exxon Mobil Corporation (NYSE:XOM) was one of them. Here is what the fund said:
“Integrated oil and gas giant Exxon Mobil Corporation (NYSE:XOM) performed well in the second quarter as continued high prices for energy products supported the stock. As the largest refiner in the US, the company has benefitted from wide “crack spreads,” or the margin between the cost of crude oil and the petroleum products extracted from it. Exxon continues to invest in refining capacity in the US, which industry wide has been in steady decline since 2019. We are pleased that Exxon has been using its strong cash flows to reduce debt and to return cash to shareholders through dividends and stock repurchases.”
14. VanEck Gold Miners ETF (NYSE:GDX)
VanEck Gold Miners ETF (NYSE:GDX) aims to closely imitate, before costs and expenses, the price and yield performance of the NYSE Arca Gold Miners Index. This index is designed to monitor the overall performance of businesses engaged in the gold mining sector. The fund was launched on May 16, 2006 and the total net assets as of February 9, 2023 stood at $12.7 billion. With a net expense ratio of 0.51%, VanEck Gold Miners ETF (NYSE:GDX) offers access to a diversified stock portfolio. The fund’s 30-day SEC yield came in at 1.54%, with an annual dividend frequency.
Out of a total of 49 holdings, Newmont Corporation (NYSE:NEM) is the largest position in VanEck Gold Miners ETF (NYSE:GDX)’s portfolio. It is a Colorado-based company engaged in the production and exploration of gold, copper, silver, zinc, and lead. On January 30, Barclays analyst Matthew Murphy raised the price target on Newmont Corporation (NYSE:NEM) to $57 from $54 and maintained an Equal Weight rating on the shares. Despite better-than-expected economic growth, the analyst believes that gold can act as a hedge against potential future economic downturns. According to the analyst, a soft landing for the economy is a possibility, but monetary policy is not yet finalized. Despite this, the analyst still prefers gold over copper equities.
According to Insider Monkey’s Q3 data, 53 hedge funds were long Newmont Corporation (NYSE:NEM), compared to 56 funds in the last quarter. Jean-Marie Eveillard’s First Eagle Investment Management is the leading position holder in the company, with 17.85 million shares worth $750.5 million.
Here is what First Eagle Investments Global Fund has to say about Newmont Corporation (NYSE:NEM) in its Q2 2022 investor letter:
“Shares of Colorado-based Newmont, the largest gold miner in the world, experienced weakness in the quarter as falling gold bullion prices and cost inflation hurt miners in general. More idiosyncratically, the company reported slightly disappointing earnings and production results for its most recent quarter due to pandemic-related disruptions, ongoing supply-chain constraints, and labor shortages.
It also warned that operating costs for 2022 were likely to come in at the upper end of previous guidance. We remain constructive on the stock, which offers steady production anchored in good jurisdictions, a good pipeline of organic projects, a strong balance sheet, and proven management.”
13. iShares U.S. Home Construction ETF (BATS:ITB)
iShares U.S. Home Construction ETF (BATS:ITB) seeks to track the investment results of Dow Jones U.S. Select Home Construction Index, which is composed of U.S. equities in the home construction sector. The ETF was created on May 1, 2006, and its net assets as of February 10, 2023 came in at nearly $1.5 billion. With 48 stocks in its portfolio, iShares U.S. Home Construction ETF (BATS:ITB) offers an expense ratio of 0.39%.
D.R. Horton, Inc. (NYSE:DHI) is the largest position in iShares U.S. Home Construction ETF (BATS:ITB)’s portfolio, representing 15.75% of the total holdings. It is a Texas-based homebuilding company that constructs and sells single-family detached homes, attached homes, townhomes, duplexes, and triplexes. On January 24, D.R. Horton, Inc. (NYSE:DHI) declared a $0.25 per share quarterly dividend, which is payable on February 14 to shareholders of record on February 7. D.R. Horton, Inc. (NYSE:DHI)’s revenue from home sales rose 1% to reach $6.7 billion, with 17,340 homes being sold in the first fiscal quarter of 2023, as compared to 18,396 homes sold in the same quarter of the previous fiscal year.
According to Insider Monkey’s data, D.R. Horton, Inc. (NYSE:DHI) was part of 42 hedge fund portfolios at the end of Q3 2022, compared to 44 in the last quarter. John Armitage’s Egerton Capital Limited is the leading stakeholder of the company, with 4.70 million shares worth $317 million.
Baron Funds made the following comment about D.R. Horton, Inc. (NYSE:DHI) in its Q4 2022 investor letter:
“The shares of D.R. Horton, Inc. (NYSE:DHI), the number one homebuilder by volume in the U.S., gained 31% in the most recent quarter following strong business results.
We are bullish about the long-term prospects for D.R. Horton primarily due to two key considerations:
1) We believe the company is positioned to perform well over time given its status as the largest and lowest-cost producer in the entrylevel home segment for first-time buyers and baby boomers looking for an affordable home. In the last fiscal year, approximately 67% of D.R. Horton’s home sales were for prices less than $400,000, thereby enabling the company to satisfy the home affordability constraints of many potential home buyers.
2) We are enthusiastic about D.R. Horton’s continued transition to a stronger and more asset-light balance sheet by outsourcing its land development spending needs to third-party developers such as Forestar Group Inc. D.R. Horton’s transition to a less capital-intensive business model is leading to stronger cash-flow generation, lower debt levels, an ability to pursue more share repurchases and/or other investment opportunities, and a higher-valuation multiple.”
12. VanEck Semiconductor ETF (NASDAQ:SMH)
VanEck Semiconductor ETF (NASDAQ:SMH) aims to closely replicate the performance in terms of price and yield of the MVIS US Listed Semiconductor 25 Index, before taking into account any fees or expenses. The index is designed to reflect the performance of companies involved in the semiconductor industry, including production and equipment firms. As of February 10, 2023, VanEck Semiconductor ETF (NASDAQ:SMH) had a gross expense ratio of 0.35% and a 30-day SEC yield of 0.91%.
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) is the biggest holding of VanEck Semiconductor ETF (NASDAQ:SMH). The company manufactures, packages, tests, and sells integrated circuits and other semiconductor devices in Taiwan, China, Europe, the Middle East, Africa, Japan, the United States, and internationally. On January 10, Morgan Stanley analyst Charlie Chan named Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) as a “Catalyst Driven Idea” ahead of the company reporting Q4 results and providing Q1 guidance on January 12. The analyst thinks gross margins may present an upside given TSMC’s wafer price hikes, and maintained an Overweight rating and NT$700 price target on TSMC shares.
According to Insider Monkey’s data, 87 hedge funds were bullish on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) at the end of September 2022, compared to 72 funds in the last quarter. Warren Buffett’s Berkshire Hathaway held a prominent stake in the company, with more than 60 million shares worth $4.11 billion.
Baron Funds made the following comment about Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) in its Q3 2022 investor letter:
“Semiconductor giant Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) detracted from performance due to the global macroeconomic slowdown and softening demand for consumer electronics. We retain conviction that Taiwan Semi’s technological leadership, pricing power, and exposure to secular growth markets, including high-performance computing, automotive, and IoT, will allow the company to deliver strong revenue growth over the next several years.”
11. Vanguard Total Intl Stock Idx Fund (NASDAQ:VXUS)
Vanguard Total Intl Stock Idx Fund (NASDAQ:VXUS) seeks to track the performance of the FTSE Global All Cap ex US Index, which is composed of stocks issued by companies located in developed and emerging markets, excluding the United States. It is a passively managed fund which remains fully invested, with an expense ratio of only 0.07%. As of January 31, Vanguard Total Intl Stock Idx Fund (NASDAQ:VXUS)’s dividend yield came in at 3.31%, with a quarterly distribution frequency. The stock portfolio is concentrated in the financials, industrials, consumer discretionary, technology, basic materials, and energy sectors, among others. The stocks belong to Europe, Pacific, Emerging Markets, North America, and Middle East regions.
10. Vanguard Developed Markets Index Fund (NYSE:VEA)
Vanguard Developed Markets Index Fund (NYSE:VEA) aims to track the investment performance of the FTSE Developed All Cap ex US Index, which offers exposure to large-, mid-, and small-cap companies in Canada and the primary markets of Europe and the Pacific region. The ETF follows a passively managed full-replication approach. The expense ratio since April 29, 2022 has remained 0.05%, while the average expense ratio of similar funds is 0.91%. Vanguard Developed Markets Index Fund (NYSE:VEA) holds 4,062 stocks, offering investors a diversified portfolio. The fund’s total net assets came in at $149 billion as of December 31, 2022.
Nestlé S.A. (OTC:NSRGY) is the largest position in Vanguard Developed Markets Index Fund (NYSE:VEA)’s portfolio, which is a food and beverage company. The company operates through Zone Europe, Middle East and North Africa, Zone Americas, and Zone Asia, Oceania and sub-Saharan Africa segments. On January 19, Berenberg analyst James Targett raised the firm’s price target on Nestlé S.A. (OTC:NSRGY) to CHF 130 from CHF 126 and kept a Buy rating on the shares.
According to Insider Monkey’s data, Tom Russo’s Gardner Russo & Gardner held the largest stake in Nestlé S.A. (OTC:NSRGY) as of Q3 2022, with 8.72 million shares worth $938.6 million.
Here is what Polen International Growth Fund has to say about Nestlé S.A. (OTC:NSRGY) in its Q1 2022 investor letter:
“We exited the Portfolio’s position in Nestlé in favor of what we believed to be a more compelling investment idea. Nestlé continues to enjoy competitive advantages related to its scale, distribution, and brand equity. We think the management team has positioned the business for success in recent years, with several divestitures along the way and believe the company is still likely to deliver consistent results. That said, our research indicates that returns may be at the lower end of our expected range and other opportunities appear more attractive.”
9. The Real Estate Select Sector SPDR Fund (NYSE:XLRE)
The Real Estate Select Sector SPDR Fund (NYSE:XLRE) seeks to provide investment results that correspond generally to the price and yield performance of the Real Estate Select Sector Index. The index aims to accurately represent the real estate sector of the S&P 500 Index, offering exposure to companies from real estate management companies, development companies, and REITs, excluding mortgage REITs. The fund was launched on October 7, 2015. The gross expense ratio came in at 0.10% as of February 12, 2023. The portfolio has 30 stocks and as of February 9, 2023, the fund’s distribution yield stood at 3.41%.
Prologis, Inc. (NYSE:PLD) is the biggest stock in The Real Estate Select Sector SPDR Fund (NYSE:XLRE)’s portfolio, representing 12.58% of the total holdings. The firm specializes in logistics real estate, with a particular emphasis on markets that are characterized by high barriers to entry and rapid growth. On January 18, Prologis, Inc. (NYSE:PLD) announced a Q4 FFO of $1.24 and a revenue of $1.75 billion, outperforming Wall Street estimates by $0.03 and $290 million, respectively.
According to Insider Monkey’s Q3 data, 59 hedge funds were long Prologis, Inc. (NYSE:PLD), compared to 49 funds in the prior quarter. Jeffrey Furber’s AEW Capital Management held the leading position in the company, comprising 2.5 million shares worth $253.6 million.
Baron Funds made the following comment about Prologis, Inc. (NYSE:PLD) in its Q4 2022 investor letter:
“Following strong quarterly results, the shares of Prologis, Inc. (NYSE:PLD), the world’s largest industrial REIT, performed well in the fourth quarter of 2022. The company owns a high-quality real estate portfolio that is concentrated in major global trade markets and large population centers across the Americas, Europe, and Asia. Prologis has an unmatched global platform, strong competitive advantages (scale, data, and technology), and attractive embedded growth prospects. The company is the only industrial REIT with an ‘A’ credit rating.
Following a roughly 33% decline in its shares in 2022, we believe Prologis’ current valuation of only 22 times cash flow and a 4.6% implied capitalization rate is compelling given that the company’s rents on its in-place leases are more than 65% below current market rents, thus providing a strong runway for growth in the next three to five years.”
8. iShares International Select Dividend ETF (BATS:IDV)
iShares International Select Dividend ETF (BATS:IDV) seeks to track the investment results of Dow Jones EPAC Select Dividend Index, which is composed of relatively high dividend paying equities in non-U.S. developed markets. With access to developed market companies that have provided consistently high dividend yields over time, iShares International Select Dividend ETF (BATS:IDV) offers a strong and diversified stock portfolio to investors. The fund has an expense ratio of 0.49% and net assets worth over $5 billion as of February 10, 2023. It has 102 stocks in its portfolio.
Rio Tinto Group (NYSE:RIO) is the biggest position among iShares International Select Dividend ETF (BATS:IDV)’s holdings. It is a London-based company engaged in exploring, mining, and processing mineral resources such as aluminum, copper, diamonds, gold, borates, titanium dioxide, salt, iron ore, and lithium. On January 23, Morgan Stanley analyst Alain Gabriel raised the firm’s price target on Rio Tinto Group (NYSE:RIO) to 5,790 GBp from 5,750 GBp and reiterated an Equal Weight rating on the shares.
According to Insider Monkey’s third quarter database, 26 hedge funds were bullish on Rio Tinto Group (NYSE:RIO), compared to 24 funds in the earlier quarter. Ken Fisher’s Fisher Asset Management is the largest stakeholder of the company, with 14.15 million shares worth $779.2 million.
7. SPDR S&P Emerging Markets Small Cap ETF (NYSE:EWX)
SPDR S&P Emerging Markets Small Cap ETF (NYSE:EWX) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P Emerging Markets Under USD2 Billion Index, offering exposure to the small capitalization segment of emerging countries. These companies have market capitalizations ranging between $100 million and $2 billion. The fund’s inception dates back to 2008, and it offers an expense ratio of 0.65%. As of February 9, 2023, SPDR S&P Emerging Markets Small Cap ETF (NYSE:EWX)’s portfolio consists of 2,892 stocks. The ETF offers a 30-day SEC yield of 4.32% and a semi-annual distribution frequency.
Alchip Technologies, Limited (3661.TW) is the largest holding in SPDR S&P Emerging Markets Small Cap ETF (NYSE:EWX)’s portfolio. It is a Taiwanese semiconductor company engaged in the research and development, design, and manufacture of fabless application specific integrated circuits, system on a chip, and provision of related services.
6. FlexShares Morningstar Developed Markets ex-US Factor Tilt Index Fund (NYSE:TLTD)
FlexShares Morningstar Developed Markets ex-US Factor Tilt Index Fund (NYSE:TLTD) seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the Morningstar Developed Markets ex-US Factor Tilt Index. As of February 10, 2023, FlexShares Morningstar Developed Markets ex-US Factor Tilt Index Fund (NYSE:TLTD) offers an expense ratio of 0.39% and total net assets of $530.46 million. The fund was established in September 2012, and the portfolio consists of 2,930 holdings.
Shell plc (NYSE:SHEL) is one of the top holdings of FlexShares Morningstar Developed Markets ex-US Factor Tilt Index Fund (NYSE:TLTD). On February 2, Shell plc (NYSE:SHEL) declared a quarterly dividend of $0.575 per American depositary share, a 15% increase from its prior dividend of $0.50. The dividend is distributable on March 27, to shareholders of record February 17. Shell plc (NYSE:SHEL)’s Q4 revenue of $101.3 billion climbed 18.8% year-over-year, beating market estimates by $59.97 billion.
According to Insider Monkey’s data, 39 hedge funds were bullish on Shell plc (NYSE:SHEL) at the end of the third quarter of 2022. Peter Rathjens, Bruce Clarke, and John Campbell’s Arrowstreet Capital is a significant position holder in the company, with nearly 12 million shares worth $593.2 million.
In addition to Alibaba Group Holding Limited (NYSE:BABA), Novo Nordisk A/S (NYSE:NVO), and ASML Holding N.V. (NASDAQ:ASML), smart investors are piling into Shell plc (NYSE:SHEL).
Here is what Harding Loevner International Equity Fund has to say about Shell plc (NYSE:SHEL) in its Q1 2022 investor letter:
“While risks of unforeseen consequences arising from the Ukraine conflict are high, on this front we are cautiously optimistic that China will work hard to maintain its neutrality in a credible way, as it is a huge beneficiary of trade with the rest of the world, especially the rich developed nations. We think it likely that China, along with India, will continue to buy oil and gas from Russia (just as Europe, at least for now, plans to keep its gas pipelines open), and do not expect that fact to alter China’s trade relations with the West much. Nevertheless, we must contemplate that our optimism is misplaced on the importance of membership in the global network of exchange. If our central and optimistic case—admittedly an educated guess—is wrong, then we’d need to greatly modify our views of which companies in our opportunity set will face new barriers to profitable growth, and which might stand to benefit, relatively, from a further receding of globalization. (Global trade, after all, has never matched the peak share of GDP it reached in 2008, before the Global Financial Crisis.) We’d expect such a world to be less efficient, as the cold logic of comparative advantage is demoted as a determinant of which goods or services are produced and where. That would lead to a less prosperous world, since exploiting comparative advantage is a cornerstone of wealth creation. If regional blocs began to raise limits on the movement of capital as well as goods, we’d need to parse which of our multinational companies were at risk of declining sales from increasingly hostile, siloed countries. Royal Dutch Shell (NYSE:SHEL) has found its Siberian oil and gas joint venture assets stranded by the combination of sanctions and the public opprobrium of Russia’s actions.”
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Disclosure: None. Diversified Stock Portfolio: Sector ETFs and International ETFs to Buy is originally published on Insider Monkey.
