On the corporate earnings front, U.S. companies have had
a relatively solid earnings season to open up the year.
Financials have once again been leading the way, but guidance has
been decent all around, especially with many forecasting a decent
recovery this year.
Still, some investors are starting to worry about brewing
troubles in Europe and concerns that are building over the
government sequester. This issue could through the market back
into the doldrums, especially if growth levels slide as a result
of this reduced spending level (also see
Defensive Sector ETFs for the Fiscal Cliff
This type of environment suggests that earnings will be a big
focus of the market, and that strong earning companies will be
the main driver of return going forward. This suggests that those
who miss earnings will be greatly punished, leaving investors to
zero in on stocks with rosier outlooks for big gains after this
recent market surge.
Against this backdrop, a focus on earnings could be ideal, and
can easily be done by looking at the Zacks ETF Rank.
About the Zacks ETF Rank
The Zacks ETF Rank provides a recommendation for the ETF in
the context of our outlook for the underlying industry, sector,
region, style box, or asset class. Our proprietary methodology
also takes into account the risk preferences of investors.
are ranked on a scale of 1 (Strong Buy) to 5 (Strong Sell) while
they also receive one of three risk ratings, namely Low, Medium,
The aim of our models is to select the best ETFs within each
risk category. We assign each ETF one of five ranks within each
risk bucket. Thus, the Zacks Rank reflects the expected return of
an ETF relative to other products with a similar level of risk
(see more in the
Zacks ETF Center
For investors seeking to apply this methodology to their
portfolio, we have taken a closer look at the top ranked EPS
WisdomTree Earnings 500 ETF (
Launched in February of 2007, the WisdomTree Earnings 500 ETF
(EPS) tracks the WisdomTree Earnings 500 Index. The index
measures the performance of 500 large cap companies which have
shown positive earnings growth over the past four fiscal years.
The index is a subset of the WisdomTree Earnings Index.
The ETF has been able to amass an asset base of just $over $50
million, something that has kept volumes level low. The fund does
pay out a yield of 2% and charges investors an expense ratio of
28 basis points (read
Play Four Megatrends with These ETFs
The ETF allocated maximum across sectors such as Information
Technology (21.16%), Financials (16.37%), Energy (13%), Consumer
Discretionary (11.18%) and Healthcare (10.74%). From an
individual holdings perspective, the ETF currently holds 494
securities in its portfolio with top allocations going to firms
Top Ranked Biotech ETF: FBT
The ETF has returned 11 for the trailing one year period. From
a risk perspective, the ETF has shown relatively low variability
in its prices as indicated by an annualized standard deviation of
16.75%. For the same time period the benchmark S&P 500 has
had an annualized standard deviation of 18.71%, although it has
outperformed EPS by a bit in the time frame.
Given that the performance has been pretty close with lower
volatility, we give the fund a low risk outlook and a Zacks ETF
Rank of 1 or 'Strong Buy'. This means that we expect this product
to outperform ones in a similar style box over the course of the
next year, making it a great choice for those seeking a low
volatility play in this environment.
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APPLE INC (AAPL): Free Stock Analysis Report
CHEVRON CORP (CVX): Free Stock Analysis
WISDMTR-ERN 500 (EPS): ETF Research Reports
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