5 Stocks in S&P 500 ETF That Have Powered Best Q3 Since 2010

The S&P 500 registered its best quarterly gains since 2010, overcoming a myriad of woes including elevated concerns, resurgence in coronavirus cases, election uncertainty and a rise in U.S.-China tensions in the third quarter. The benchmark was up 8.5%, representing its best back-to-back quarter since 2009.

The strong performance was powered by prolonged support by the central bank to contain the pandemic as well as the progress to develop treatments and vaccines for COVID-19. The prospect of further stimulus is also driving stocks higher. Additionally, rounds of upbeat data, which indicate that the economy is on a recovery path instilled confidence.

In particular, Americans are more optimistic about the economy with their confidence rising to the highest level in September since the coronavirus pandemic began. The housing market has been booming with rock-bottom mortgage rates and higher demand for homes. According to the latest data from the National Association of Realtors survey, pending home sales surged to record highs in August. Homebuilder confidence increased for a fifth straight month in September, hitting an all-time high (read: ETFs to Gain as U.S. New Home Sales Hit 14-Year High).

Further, a rise in mergers and acquisitions, and a weak dollar led to a spike in the stock market. Notably, the ICE (NYSE:ICE) U.S. Dollar Index has lost 3.7% in the third quarter. The dollar weakness acts as a huge tailwind for the mega-cap companies, which derive most of their revenues from international markets. This is because a weak dollar makes dollar-denominated assets cheap for foreign investors, making U.S. multinationals more competitive and leading to increased profits.

Against such a backdrop, the proxy version of the S&P 500 Index, SPDR S&P 500 ETF Trust (ASX:SPY) SPY, has gained 8.3% over the past three months. Let’s take a closer look at the fundamentals of SPY and its best stocks:

Inside the SPY

The ETF holds 505 stocks in its basket with each accounting for no more than 6.7% of assets. This suggests a nice balance across each security and prevents heavy concentration. The fund is widely spread across sectors with information technology, healthcare, consumer discretionary, communication services and financials accounting for double-digit allocation each. It has AUM of $290.7 billion and charges 9 bps in fees per year. The product trades in heavy volume of around 59 million shares a day on average, ensuring higher liquidity with a tight bid/ask spread, leading to lower trading costs for investors (see: all the Large Cap Blend ETFs here).

SPY has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook. Though most stocks in the fund’s portfolio are in the green for the third quarter, we have highlighted five that are leading the way in the ETF and have a Zacks Rank #2 or 3 (Hold):

Best-Performing Stocks of SPY

L Brands Inc (NYSE:LB). LB: It operates as a specialty retailer of women's intimate and other apparel, personal care, and beauty and home fragrance products. The Zacks Consensus Estimate moved up from a loss of 6 cents to earnings of $1.17 for fiscal year (ending January 2021) in the past three months. The stock has soared 112.5% in the third quarter and has a Zacks Rank #3.

FedEx Corporation (NYSE:FDX) FDX: It is the leader in global express delivery services and provides a broad portfolio of transportation, e-commerce and business services through companies competing collectively, operating independently and managed collaboratively, under the FedEx brand. The stock has climbed 79.4% and has an estimated earnings growth of 59.4% for this fiscal year (ending May 2021). It has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Advanced Micro Devices (NASDAQ:AMD) Inc. AMD: It operates as a semiconductor company worldwide. It has jumped 55.8% in the third quarter and has an estimated earnings growth rate of 71.9% for this year. Advanced Micro has a Zacks Rank #3 (read: 5 Top-Ranked Tech ETFs to Buy on the Dip).

United Parcel Service Inc (NYSE:UPS). UPS: It is the world's largest express carrier and package delivery company that provides specialized transportation and logistics services in the United States and internationally. The stock has gained 49.9% and seen solid earnings estimate revision of $1.39 for this year over the past three months. It has a Zacks Rank #2.

Varian Medical Systems Inc (NYSE:VAR). VAR: This company is the world’s leading provider of radiotherapy, radiosurgery, proton therapy and brachy therapy for treating cancer and other medical conditions. It has soared 40.4% and has an earnings growth rate of 33.7% for fiscal year (ending September 2021). The stock has a Zacks ETF Rank #3.

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Advanced Micro Devices, Inc. (AMD): Free Stock Analysis Report

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