The ETF industry continues to grow and evolve. Total assets in
US listed ETFs exceed $1.5 trillion, while the number of products
is more than 1,500 now. However, the industry continues to be
The largest ETF SPDR S&P 500 ETF (SPY) now has more than $147
billion in AUM, while the top 10 funds hold almost 30% of total
4 Unbeatble Strategies for Q4
Larger ETFs are usually more popular with investors as most of them
follow the simpler market cap weight methodology, often have lower
expense ratios and ample liquidity.
At the same time, some ETFs that focus on 'niche' strategies have
been outstanding performers and are worth a look as they are
expected to continue their outperformance going forward. (Read:
3 Ultracheap ETFs for Value Investors
Below we present three such ETFs that have outperformed the broader
market year-to-date as well as over one year and three year
periods. But they remain rather unknown due to lack of investor
Spin higher profits with Guggenheim Spin-Off ETF (
One Year Return
3 Year Return
shows that spun-off entities generally outperform their
parents and the broader market. They typically underperform in the
first few weeks of trading--presumably due to selling by
institutional investors, but they recover nicely subsequently.
whose parent is in the S&P 500 underperformed the index by 2.4%
over the first month, but outperformed the index by 5.6% over three
months and 17.4% over 12. (Read:
3 Megacap ETFs for Mega Returns
One of the reasons could be that investors prefer focused smaller
companies more than bigger diversified ones. CSD tracks the Beacon
Spin-off Index that includes companies that have been spun-off
within the past 30 months but not more recently than six months
prior to the applicable rebalancing date. Index constituents are
primarily small- and mid-cap companies with capitalizations under
The index is comprised of up to 40 highest-ranking stocks selected
from a universe of spun-off companies, using a quantitative rules
based methodology. Each stock is given a modified market cap
weighting with a maximum weight of 5%, resulting in a pretty
diversified basket. The index is rebalanced semi- annually.
The product has $371 million in AUM, currently invested in 25
securities. Top holdings include Phoenix New Media, Exelis, Lumos
Networks and Tripadvisor. In terms of sector allocations,
Industrials, Consumer Discretionary and Energy occupy the top three
The fund charges an expense ratio of 65 basis points
Play the Booming IPO Market with First Trust US IPO Index
The IPO market has been extremely hot this year, delivering
its best performance in six years-. with the number of deals priced
so far totaling 160, far ahead of 109 deals priced through the same
date in 2012, per Dealogic.
The main reasons for soaring interest in IPOs are an improving
economy and an excellent stock market performance. Among the most
anticipated upcoming offering are Twitter, Hilton Holdings and
Chrysler. China's largest e-commerce company, Alibaba is also
reported to be planning an IPO in the US.
FPX provides a low-risk and convenient way to profit from the US
The product tracks the IPOX-100 U.S. Index, which is modified
value-weighted price index measuring the performance of 100
largest, typically best performing and most liquid U.S. IPOs.
Currently, the product has a nice mix of sectors, with top four
being Consumer Discretionary, IT, Energy and Healthcare. In terms
of individual holdings, Facebook, AbbVie and General Motors
take the top three spots.
The product charges an expense ratio of 60 basis points.
Forget Dividends, Focus on
PowerShares Buyback Achievers Portfolio
Most investors focus on dividend only but by doing so, they miss
the bigger picture. In fact, companies in the S&P 500 spent
about $3.1 trillion on buybacks from 2004 to 2012, while they paid
$2.1 trillion in dividends in the same time. The trend has
continued with share repurchases increasing to $118.1 billion
during 2Q 2013, up 18.1% from the prior-year quarter.
Research by Ford Equity Research, (creator of NASDAQ buyback
index methodology), shows that companies that reduced their shares
by at least 5% between 1975 and 2003, outperformed S&P 500
index in 24 out of 28 years. It further shows that between 2006 and
2011, companies buying back shares produced excess returns with
PKW tracks the NASDAQ US Buyback Achievers Index, which is
comprised of companies that have repurchased 5% or more of their
common stock in the trailing 12 months.
The fund charges an expense ratio of 71 basis points currently.
ConocoPhillips, Amgen and Oracle are the top holdings as of now.
A Note about Low-Volume ETFs
One of our readers had expressed concerns about low volume when I
wrote about some of these ETFs earlier this year. Many investors
are unfamiliar with ETF liquidity and low-volume ETFs are often
ignored by investors as they connect low volume with illiquidity.
The liquidity of an ETF is not determined by its trading volume but
by the liquidity of underlying shares (ETFs' holdings). ETFs
are different from stocks in this area and their trading volume
should not be interpreted like stock trading volume.
At the same time, low volume does usually lead to wider bid-ask
spreads, which add to the trading costs. So, these ETFs are not
suitable for frequent trading. And it does make sense to use limit
orders while trading in low-volume ETFs.
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GUGG-SPIN-OFF (CSD): ETF Research Reports
FT-IPOX 100 (FPX): ETF Research Reports
PWRSH-BYBK ACHV (PKW): ETF Research Reports
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