U.S. large-caps have been a favorite asset class in 2012 with investors preferring bigger, more-established companies.
S&P Capital recommends the iShares S&P 100 Index Fund (OEF) which has an expense ratio of 0.2% and focuses on the market’s largest stocks.
“S&P Capital IQ Equity Strategy Group favors relatively high exposure to the Consumer Staples, Energy and Information Technology sectors. As of June 2012, OEF had 50% of its assets in these sectors, compared to 42% for IVV. In contrast, OEF had less exposure to the Materials and Utilities sectors (3% vs. 7%), two sectors that S&P Capital IQ views less favorably from a top-down perspective,” the research firm said in a note. [Why the Stock ETF Rally May Have Legs]
OEF touts $4.9 billion in assets under management and has proven to be an affordable way to buy the S&P 100 index. The ETF holds top-quality stocks such as Apple (AAPL) and Exxon Mobile (XOM). Furthermore, 8 of the top 10 holdings in OEF are also members of the Dow Jones Industrial Average. [ETF Chart of the Day: Mega Caps]
“Overall, OEF receives an Overweight ranking from S&P Capital IQ. We think this diversified offering provides investors exposure to a number of stocks that are viewed favorably from a valuation and risk perspective at a low cost,” Todd Rosenbluth of S&P Capital wrote.
Justin Menza for CNBC.com reports that news of the European Central Bank taking steps to contend with the debt crisis and that U.S. and Chinese policy makers will take action to stimulate growth, has given the stock market strength. Cyclical and growth sectors such as energy, materials and consumer discretionary are positioned to outperform in August.
Year-to-date, through august 16, OEF has gained 16%. Comparatively,the iShares S&P 500 Index Fund (IVV) ,which tracks the S&P 500, has gained 14% over the same time period. The stocks that are held in OEF are viewed positively from a risk and valuation standpoint by S&P Capital. [Surveying S&P 500 ETF Options]
iShares S&P 100 Index Fund
Tisha Guerrero contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.