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RYU: A High-Flying ETF, Not The Guy From 'Street Fighter'

ETF Professor

It can be argued that Ryu is one of the most popular characters from the famous "Street Fighter" video game franchise. You weren't really playing with Dhalsim, were you? There is another RYU that deserves more popularity: The Guggenheim S&P 500 Equal Weight Utilities ETF (NYSE: RYU).

A More Worthy RYU

As was recently noted in this space regarding RYU's consumer staples counterpart, the Rydex S&P Equal Weight Consumer Stap ETF (NYSE: RHS), the equal-weight strategy can produce significant gains at the sector level. Guggenheim is one of the pioneers of the smart beta ETF movement, particularly when it comes to equal-weight funds.

Related Link: A Bold, Bearish Call On Utilities ETFs

For the bulk of this year, utilities ETFs, cap-weighted and equal-weight funds, have been surging with a big helping hand from a Federal Reserve reluctant to boost interest rates. RYU's cap-weighted equivalent, the Utilities SPDR (ETF) (NYSE: XLU), has been soaring while raking in a slew of new assets.

Utilities, Seasonality And RYU

Amid diminishing odds of a June or July rate hike, the Fed continues to be a positive catalyst for utilities ETFs. Markets seem to be confirming as much as three utilities ETFs, including RYU hit all-time highs on Wednesday.

Like RHS, RYU is outperforming its cap-weighted rivals this year. The equal-weight utilities ETF is up 17.6 percent this year compared to 17 percent for XLU. And like RHS, RYU can also top its cap-weighted peers over longer holding periods. Over the past three years, including dividends paid, RYU is higher by 49.3 percent compared to 47.7 percent for XLU. RYU has also been slightly less volatile than cap-weighted utilities ETFs over that period.

Additionally, the time could be right to consider RYU. It's often said that owning lower volatility sectors, such as consumer staples and utilities, is a good way of maintaining long equity exposure during what can be a trying May through October time frame.

Utilities certainly work at this time of year with July historically being an exception. In June, August and September, the utilities is, on a historical basis, one of the two best sectors in each of those months.

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