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Should WisdomTree U.S. Earnings 500 Fund (EPS) Be on Your Investing Radar?

Zacks Equity Research
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Launched on 02/23/2007, the WisdomTree U.S. Earnings 500 Fund (EPS) is a passively managed exchange traded fund designed to provide a broad exposure to the Large Cap Value segment of the US equity market.

The fund is sponsored by Wisdomtree. It has amassed assets over $217.56 M, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. They tend to be stable companies with predictable cash flows and are usually less volatile than mid and small cap companies.

Value stocks have lower than average price-to-earnings and price-to-book ratios. They also have lower than average sales and earnings growth rates. While value stocks have outperformed growth stocks in nearly all markets when you consider long-term performance, growth stocks are more likely to outpace value stocks in strong bull markets.

Costs

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

Annual operating expenses for this ETF are 0.28%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.72%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 20.70% of the portfolio. Financials and Healthcare round out the top three.

Looking at individual holdings, Apple Inc (AAPL) accounts for about 5.98% of total assets, followed by Microsoft Corp (MSFT) and Jpmorgan Chase & Co (JPM).

The top 10 holdings account for about 23.29% of total assets under management.

Performance and Risk

EPS seeks to match the performance of the WisdomTree U.S. Earnings 500 Index before fees and expenses. The WisdomTree U.S. Earnings 500 Index is a fundamentally weighted index that measures the performance of earnings-generating companies within the large-capitalization segment of the U.S. Stock Market.

The ETF has added about 2.78% so far this year and was up about 8.86% in the last one year (as of 10/11/2018). In the past 52-week period, it has traded between $29.40 and $33.13.

The ETF has a beta of 1.04 and standard deviation of 11.99% for the trailing three-year period, making it a medium risk choice in the space. With about 497 holdings, it effectively diversifies company-specific risk.

Alternatives

WisdomTree U.S. Earnings 500 Fund carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, EPS is a good option for those seeking exposure to the Large Cap ETFs area of the market. Investors might also want to consider some other ETF options in the space.

The iShares Russell 1000 Value ETF (IWD) and the Vanguard Value ETF (VTV) track a similar index. While iShares Russell 1000 Value ETF has $36.89 B in assets, Vanguard Value ETF has $43.11 B. IWD has an expense ratio of 0.20% and VTV charges 0.05%.

Bottom-Line

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

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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