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Is iShares MSCI USA Equal Weighted ETF (EUSA) a Strong ETF Right Now?

Zacks Equity Research

The iShares MSCI USA Equal Weighted ETF (EUSA) was launched on 05/05/2010, and is a smart beta exchange traded fund designed to offer broad exposure to the Style Box - All Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has traditionally been dominated by products based on market capitalization weighted indexes that are designed to represent the market or a particular segment of the market.

Investors who believe in market efficiency should consider market cap indexes, as they replicate market returns in a low-cost, convenient, and transparent way.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

The fund is sponsored by Blackrock. It has amassed assets over $292.22 M, making it one of the average sized ETFs in the Style Box - All Cap Blend. EUSA, before fees and expenses, seeks to match the performance of the MSCI USA Equal Weighted Index.

The MSCI USA Equal Weighted Index represents the MSCI USA Index, measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.

Cost & Other Expenses

Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.

Annual operating expenses for EUSA are 0.15%, which makes it one of the cheaper products in the space.

EUSA's 12-month trailing dividend yield is 1.66%.

Sector Exposure and Top Holdings

Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.

This ETF has heaviest allocation in the Information Technology sector - about 16.30% of the portfolio. Financials and Industrials round out the top three.

When you look at individual holdings, L3harris Technologies Inc (LHX) accounts for about 0.32% of the fund's total assets, followed by Tableau Software Inc Class A (DATA) and Total System Services Inc (TSS).

The top 10 holdings account for about 2.08% of total assets under management.

Performance and Risk

The ETF has added about 23.16% and was up about 7.71% so far this year and in the past one year (as of 07/25/2019), respectively. EUSA has traded between $47.02 and $60.88 during this last 52-week period.

EUSA has a beta of 1.06 and standard deviation of 11.81% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 643 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Equal Weighted ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $21.85 B in assets, Vanguard Total Stock Market ETF has $119.36 B. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

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 - All Cap Blend.

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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iShares MSCI USA Equal Weighted ETF (EUSA): ETF Research Reports
 
Tableau Software, Inc. (DATA) : Free Stock Analysis Report
 
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
 
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
 
Total System Services, Inc. (TSS) : Free Stock Analysis Report
 
L3Harris Technologies Inc (LHX) : Free Stock Analysis Report
 
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