There’s a clear framework behind stock selection, one that ETFs – particularly actively managed funds – aim to apply in pursuit of consistent outperformance.
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Some ETFs are large, low-cost vehicles designed to track broad indices, while others take a more targeted approach and charge higher fees. As those costs rise, however, so do expectations, with investors demanding stronger returns to justify the added expense.
The Vanguard U.S. Momentum Factor ETF (VFMO) and the Vanguard Industrials ETF (VIS) are two such options that have both managed to surpass the rest of the market, with year-to-date total returns of 16% and 13%, respectively – well ahead of the S&P 500.
Though VFMO is a relatively small ETF with $1.56 billion in assets under management, it counts more than 650 holdings in its portfolio. The ETF sources its investments from all corners of the U.S. equity market, providing a healthy mix of various market capitalizations, sectors, and industries.
As the name implies, the fund’s management looks to purchase stocks that are enjoying strong momentum. Accessing that momentum doesn’t come for free, however, and VFMO carries an expense ratio of 0.13%.
Still, it’s hard to argue with its track record in 2026, especially as volatility has rippled throughout the markets. That’s one of the reasons top investor Mike Zaccardi thinks VFMO is a wise investment.
“With recent outperformance, an attractive valuation, and a bullish chart, I see more upside ahead,” states the 5-star investor, who is among the top 1% of stock pros covered by TipRanks.
Zaccardi likes the “nice mix” comprising VFMO’s portfolio, citing the cyclicals, defensives, and growth equities among its holdings. The fact that the ETF spreads things out far and wide helps to ensure that no one company or sector comes to “dominate” its portfolio.
Seasonality also plays a role. Historically, VFMO has delivered its strongest stretch between May and August, a trend Zaccardi points to as another tailwind. As spring gives way to summer, the setup, in his eyes, continues to lean in the fund’s favor.
“The momentum ETF checks just about all the boxes right now: outperformance, absolute strength, an attractive valuation, diversification, bullish seasonals,” sums up Zaccardi, who rates VFMO a Buy. (To watch Zaccardi’s track record, click here)
VIS is another ETF on Zaccardi’s list, and it’s also been shining this year. It’s a bit bigger than VFMO, with close to $8 billion in assets under management sourced from almost 400 stocks in the Industrials sector.
VIS comes with a lower holding cost, carrying an expense ratio of 0.09%, although its year-to-date performance trails that of VFMO. Even so, that hasn’t tempered Zaccardi’s upbeat view on the fund.
“Bullish seasonal trends, strong support levels, and improving momentum indicators suggest VIS could retest its $345 all-time high,” states the investor.
While Industrials have risen this year, Zaccardi also points out that VIS is one of the most “diverse US sector ETFs.” Not only does no single equity account for more than 5.1% of the ETF, but the top 10 holdings only comprise a “modest” 30% of the entire portfolio.
That being said, it’s not cheap, with a “lofty” price-to-earnings ratio in the high 20s. And yet, this high valuation doesn’t bother Zaccardi.
“I’m not overly concerned about this right now, however, given the healthy mix of AI-related names and geopolitical-beneficiary Aerospace & Defense stocks,” states the investor.
He suggests that VIS could see promising seasonal gains, as, like VFMO, it has also performed well in the months between April and August. Although Industrials aren’t cheap, the investor also argues that the sector has demonstrated “remarkable resilience” over the past few years. That should continue, especially if the ceasefire in the Middle East holds
“With a bullish seasonal period underway and signs of a durable bounce, I expect the rally to continue,” concludes Zaccardi, who is also giving VIS a Buy rating.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.