Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
Suitability
Investors seeking industrials-sector exposure in a diversified portfolio can consider the sector-specific exchange-traded fund iShares U.S. Industrials ETF IYJ. The main subsectors covered in this fund are industrial conglomerates,  Read more 

Bull Case

The automotive, manufacturing, and transport segments of the U.S. industrials sector all have posted very strong results of late.
As the economic recovery continues, many of the late-cycle firms in this ETF should shine.
The upcoming exit of its North American retail finance business should further widen the already wide moat of this ETF's largest holding, GE. Read more 

Bear Case

The aerospace and U.S. nonresidential construction segments have continued to struggle.
IYJ's expense ratio is much higher than that of two other peer funds, whose performance is almost perfectly correlated with that of IYJ. As a result, investors might want to consider those cheaper options.
Defense companies can alter the expected cyclical performance of IYJ and currently are facing reduced government spending because of sequestration. Read more 

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