These ETFs Focus On Companies With Big, Fat Profit Margins
Lately we have been talking about earnings, because we are squarely planted in corporate earnings season, and the #2 weighted component in the Dow Jones Industrial Average, MMM (6.15%), reported their quarterly results before the open just this morning.
With the market trading at elevated levels according to some analysts, “Fundamentals” and specifically “Earnings” may very well be a driver in very short-term stock market returns with earnings season upon us. Thus we are looking at several “Earnings” based ETFs today for those whom may not be acclimated with them.
Today we are specifically talking about several WisdomTree ETFs that focus on “Earnings” as the primary factor for composing index methodology. EXT (WisdomTree Total Earnings, Expense Ratio 0.28%, $63.8 million in AUM) does not typically trade a ton of daily volume (only about 2,900 shares on average), but it does have occasions here and there where it might trade larger blocks and see a 25k-30k share day for example.
Holding 1,312 names, top holdings in the fund are 1) AAPL (4.37%), 2) JPM (2.54%), 3) BRK.B (2.25%), 4) XOM (1.98%), and 5) WFC (1.80%). According to fund literature EXT “seeks to track the investment results of broad earnings-generating companies in the U.S. equity market,” and furthermore is designed to deliver the following to investors: “1) Gain broad U.S. all cap equity exposure to profitable companies 2) Use to complement or replace all cap active and passive strategies with the potential for more favorable valuations.”
Other WisdomTree “Earnings” funds we like to watch are EPS (WisdomTree Total Earnings 500, Expense Ratio 0.28%, $119 million in AUM), EES (WisdomTree SmallCap Earnings, Expense Ratio 0.38%, $452 million in AUM), and EZM (WisdomTree MidCap Earnings, Expense Ratio 0.38%, $754 million in AUM).
Noticeably, the Small and MidCap entries here are significantly larger than the Large Cap Earnings based funds in terms of asset size, which conceptually makes sense from the standpoint that investors may traditionally look at Large Cap companies as being “efficiently priced” in terms of their valuations versus their fundamentals. On the flipside, it makes sense that investors may potentially see more opportunity in “Earnings” as a factor for Mid and Small Cap names.
The WisdomTree Total Earnings Fund ETF (NYSE:EXT) was trading at $80.12 per share on Tuesday afternoon, down $0.5 (-0.62%). Year-to-date, EXT has gained 0.44%, versus a 1.89% rise in the benchmark S&P 500 index during the same period.
EXT currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #49 of 108 ETFs in the Large Cap Blend ETFs category.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.
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