With much of the U.S. sector ETF options activity in recent days predicated on upcoming quarterly earnings releases of major component stocks such as MSFT, AAPL, IBM, GOOG, DIS, HD, CMCSA, and AMZN to name a few, this gives us reason to highlight a largely unknown ETF that is based on just that — corporate earnings.
EXT (WisdomTree Total Earnings, Expense Ratio 0.28%) debuted back in early 2007 but only has amassed $57.5 million in assets under management while averaging only 2,700 shares traded daily.
The ETF is based on the WisdomTree Earnings Index, which “is a fundamentally weighted index “that measures the performance of earnings-generating companies within the broad U.S. stock market.”
WisdomTree isolates U.S. companies that have generated positive earnings in the preceding four fiscal quarters and then “weights” the index by “proportionate share of the aggregate earnings each component company has generated.”
So in short, companies with greater “Earnings” have a much larger footprint than companies that are just barely in the black.
The fund, as one might expect, is slanted toward Large Cap “Value” equities, with top holdings in names as follows: XOM (3.72%), AAPL (2.83%), MSFT (2.48%), CVX (2.28%), and JPM (1.91%).
Interestingly, in terms of the market capitalization weighted S&P 500 Index, the top three holdings are identical (XOM 2.79%, AAPL 2.58%, MSFT 1.80%), but then there is substantial differentiation down the line when comparing all holdings in the fund relative to a known benchmark.
Currently there are 1,412 individual equity holdings within EXT, with more than 20% of the overall fund assets invested in the top ten companies in the index.
This week has actually been rather healthy for EXT volume, with more than 20,000 shares trading in one session alone on Monday, which is not a huge notional dollar amount, but it is ten times the normal daily volume in this particular ETF.
EXT is outperforming the S&P 500 impressively since inception and from a comparison standpoint has a 1.88 dividend yield compared to 2.08% of SPY (SPDR S&P 500, Expense Ratio .09%).
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