This Overlooked ETF Has Beaten the S&P 500 for 3 Straight Years

The First Trust RBA American Industrial Renaissance ETF (AIRR) has delivered 38.9% average annual returns over the past three years and 21.7% over the past 10 years, outpacing the S&P 500 in each of the last three years. The fund is built around the reshoring theme, with 92% of assets in industrials and 8% in financials, and its top holdings include Argan, MasTec, Comfort Systems, Sterling Infrastructure, and EMCOR. The article is largely an ETF/theme review rather than a company-specific catalyst, so near-term market impact should be limited.

Analysis

The market is beginning to price a broader industrial capex supercycle, but the key second-order effect is not simply “reshoring wins.” The real earnings leverage sits with subcontracted execution capacity: firms that can convert backlog into revenue without needing large balance sheets, while also passing through labor and materials inflation. That favors asset-light specialty contractors and infrastructure platform names over classic capital-intensive manufacturers, because the former can compound margins as utilization rises while the latter face a slower payback on domestic capacity buildout.

This is also a relative-value story inside industrials. If reshoring remains the dominant policy/portfolio flow, the crowded trade is likely the obvious domestic industrial basket, which means valuation dispersion should widen versus more cyclical or lower-quality industrials. Community-bank exposure inside the basket is a tell: the market is effectively underwriting local credit creation around construction, plant expansion, and municipal-linked projects. That creates a multi-quarter tailwind, but it also makes the theme more sensitive to financing conditions than the headline narrative suggests.

The main risk is that the market is extrapolating policy permanence from a cyclical reopening in PMI and a tariff regime that may not be durable. If tariff pressure eases or supply-chain bottlenecks normalize faster than expected, the operating leverage embedded in these names can compress just as quickly as it expanded. Separately, if rates back up, the cost of funding for smaller industrials and project-heavy contractors rises first, which can produce a sharper drawdown than in mega-cap equities even if the macro backdrop remains constructive.

Consensus is probably underestimating how much of the upside is already in the obvious winners and overestimating how broad the beneficiary set is. The highest-conviction names are those with recurring service revenue, pricing power, and project backlogs tied to domestic power, data-center, and manufacturing buildouts—not generic industrial beta. In other words, the theme is real, but the trade should be precision-selected rather than index-chased.

Key Decisions for Investors

• Long STRL / MTZ / EME basket on a 3-6 month horizon as the cleanest execution-leverage expression of reshoring; prefer pullbacks of 5-8% versus chasing strength, with a target of another 15-20% if backlog converts as expected.
• Use AIRR only as a thematic hedge, not a core position: initiate a starter long on weakness and cap sizing because the ETF likely compresses to lower-quality exposure if the trade becomes crowded; upside is mid-single digits near term, but drawdowns can be fast if rates rise.
• Pair trade: long EME or STRL vs short a more rate-sensitive small-cap industrial proxy over 1-2 quarters; the thesis is that financing costs will hit asset-heavy names before backlog-rich contractors, offering a cleaner risk-adjusted spread.
• Buy 3-6 month call spreads on STRL or EME to express upside with defined downside; this is preferable to outright equity exposure because the main catalyst path is gradual backlog recognition, while macro reversal risk is binary.
• Fade indiscriminate reshoring enthusiasm by avoiding low-quality cyclicals and the weakest balance-sheet names in the space; if policy support fades, these are the first to de-rate even if the best operators keep compounding.