Is WisdomTree U.S. LargeCap ETF (EPS) a Strong ETF Right Now?

Launched on 02/23/2007, the WisdomTree U.S. LargeCap ETF (EPS) is a smart beta exchange traded fund offering broad exposure to the Style Box - Large Cap Value category of the market.

What Are Smart Beta ETFs?

Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.

These indexes attempt to select stocks that have better chances of risk-return performance, based on certain fundamental characteristics or a combination of such characteristics.

While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.

Fund Sponsor & Index

Managed by Wisdomtree, EPS has amassed assets over $648.41 million, making it one of the average sized ETFs in the Style Box - Large Cap Value. Before fees and expenses, this particular fund seeks to match the performance of the WisdomTree U.S. Earnings 500 Index.

The WisdomTree U.S. LargeCap Index is a fundamentally weighted index that measures the performance of earnings-generating companies within the large-capitalization segment of the U.S. Stock Market.

Cost & Other Expenses

For ETF investors, expense ratios are an important factor when considering a fund's return; in the long-term, cheaper funds actually have the ability to outperform their more expensive cousins if all other things remain the same.

Annual operating expenses for EPS are 0.08%, which makes it one of the least expensive products in the space.

It has a 12-month trailing dividend yield of 1.77%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

EPS's heaviest allocation is in the Information Technology sector, which is about 24.50% of the portfolio. Its Healthcare and Financials round out the top three.

Taking into account individual holdings, Apple Inc (AAPL) accounts for about 5.66% of the fund's total assets, followed by Microsoft Corp (MSFT) and Alphabet Inc-Cl A (GOOGL).

EPS's top 10 holdings account for about 28.36% of its total assets under management.

Performance and Risk

So far this year, EPS has lost about -12.08%, and is down about -5.87% in the last one year (as of 08/23/2022). During this past 52-week period, the fund has traded between $39.74 and $50.92.

The fund has a beta of 1.01 and standard deviation of 23.93% for the trailing three-year period, which makes EPS a medium risk choice in this particular space. With about 503 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. LargeCap ETF is a reasonable option for investors seeking to outperform the Style Box - Large Cap Value segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Russell 1000 Value ETF (IWD) tracks Russell 1000 Value Index and the Vanguard Value ETF (VTV) tracks CRSP U.S. Large Cap Value Index. IShares Russell 1000 Value ETF has $53.73 billion in assets, Vanguard Value ETF has $100.77 billion. IWD has an expense ratio of 0.18% and VTV charges 0.04%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Value.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.