When most investors think of "Blue Chips," stocks in the Dow Jones Industrial Average come to mind. But ETFs focused on a new set of blue chips are leading the market higher.
Loaded up with stocks like Nvidia, Amazon.com and Tesla, none of which are in the Dow, the Fidelity Blue Chip Growth ETF is up 23% this year. That easily tops the 7.7% year-to-date return of the S&P 500. Similarly, the T. Rowe Price Blue Chip Growth ETF is up 21.5%.
Both blue chip focused ETFs are even outperforming Cathie Wood's ARK Innovation, which is up 20.4%. That's somewhat surprising as ARK Innovation is filled with mostly smaller growth stocks, which usually race ahead of traditional blue chips, especially when growth is in favor as it is now.
These ETFs take a unique spin on what's considered a blue chip.
"Blue chip growth is another way of saying high quality growth and companies with strong balance sheets and consistent earnings growth records are in favor," said Todd Rosenbluth, head of research at VettaFi. "These companies are well positioned to benefit during times of uncertainty."
What Are These New Blue Chips Not In The Dow Jones?
Neither Fidelity nor T. Rowe Price's blue-chip ETFs provide their top holdings on a daily basis like most ETFs do. That makes it impossible to know exactly what stocks they own at any time.
"Traditional ETFs tell the public what assets they hold each day. This ETF will not," said the Fidelity Blue Chip Growth prospectus. This freedom allows the fund's managers to choose stocks independently of an index.
"These ETFs also show the benefits of active management as the funds have outperformed even the index-based growth ETFs through security selection," Rosenbluth said.
But both blue-chip ETFs, though, do publish their top holdings at quarter's end. And that allows investors to look inside to see what they own. And it's a very different tact.
How New Blue Chips Vary From The Dow Jones
You won't find traditional value-oriented blue chips in these ETFs, as you would in the Dow.
Neither ETF owns Goldman Sachs, for instance, which is the No. 2 weighting in the Dow at 6.4%. There's no McDonald's, either, which is a No. 5 position in the Dow at 5.9%.
But what will you find? The top two holdings in Fidelity Blue Chip Growth are both in the Dow, too. Apple accounts for 10.5% while Microsoft is 9.5%, as of March 31, says Morningstar Direct. But No. 3 in the Fidelity ETF is Nvidia, a Dow outsider, at 8.2%. And Tesla is a 3.4% weight.
T. Rowe's version also holds Microsoft and Apple as its top two holdings. But in its No. 3 position is Google parent Alphabet, which is nowhere to be found in the Dow. It, too, owns Nvidia and Meta Platforms.
"The Dow Jones Industrials Average is more core or value oriented than growth focused with hefty stakes in financials and health care. The ETFs you mentioned have significantly more exposure to information technology which has been a stronger performing sector," Rosenbluth said.
Investors Aren't Convinced, Though
Are these blue-chip growth ETFs ahead of their time, or just lucky? Investors don't seem convinced just yet. Flows into the ETFs has been slow.
Fidelity Blue Chip Growth has just $494 million in assets. And T. Rowe Price Blue Chip Growth just $328.4 million.
"Despite the performance success, these funds remain small as most people do not realize Fidelity and T. Rowe Price have brought their expertise to the ETF market not just the mutual fund one," Rosenbluth said.
Top Ten Holdings In Fidelity Blue Chip Growth ETF
As of March 31
| Company | Symbol | Weight in ETF | YTD % ch. |
|---|---|---|---|
| Apple* | 10.5% | 31.7% | |
| Microsoft* | 9.5% | 30.2% | |
| Nvidia | 8.2% | 103.7% | |
| Amazon.com | 7.2% | 36.6% | |
| Alphabet | 5.4% | 35.2% | |
| Meta Platforms | 3.8% | 100.4% | |
| Tesla | 3.4% | 40.8% | |
| Marvell Technology | 2.6% | 16.6% | |
| Netflix | 2.1% | 14.8% | |
| Uber Technologies | 2.0% | 52.4% |
Sources: Morningstar Direct, S&P Global Market Intelligence, IBD, * — in the Dow
Follow Matt Krantz on Twitter @mattkrantz
