NEW YORK (TheStreet) -- One long time strategy utilized by professional investors is sector rotation which is built on the premise that at certain points in the stock market an economic cycles some sectors are better to hold and some are better to avoid. For example, industrial stocks tend to outperform in a bull market, staples hold up better in a market downturn and utilities will struggle in a rising rate environment.
The Huntington US Equity Rotation Strategy ETF (HUSE) offers investors access to the strategy in an actively managed fund.
HUSE benchmarks 70% of its assets to the S&P 1500 index which is a total market index tracked by the iShares Core S&P Total US Market ETF (ITOT). HUSE will overweight and underweight the various sectors based on a top down assessment of the current market environment. The other 30% of the fund will be devoted to a more meaningful overweight positions in the managers' two favorite sectors which as of its most recent report are health care and technology.
Each sector within the fund will be populated with 'high quality' companies that the managers believe are likely to outperform based on their bottom up analysis that considers management track record, balance sheet management and favorable growth trends.As of its most recent reporting, HUSE was overweight health care and technology as noted above but was underweight every other sector of the S&P 1500. The decision to be overweight tech and health care is curious because those two sectors tend to have a low correlation. According to ETF Replay the Healthcare Select Sector SPDR (XLV) and the Technology Select Sector SPDR (XLK) have a 0.52 correlation with each other which is low. Where the sectors tend to trade differently HUSE appears to be relying more on stock picking than sector selection.