For instance, bad news at Bank of America would have less of effect on the price of SDY and DVY, which weight the banking giant at 2.66% and 3.08%, respectively.
The sector makeup has a couple of extremes that are also important to note when evaluating the ETFs. The financial sector comprises 43% of DHS. This could be an issue if the yield curve stays inverted much longer, since lending money can be unprofitable with an inverted curve. DHS also has a very small weight in energy, at 3.4%. Obviously, energy has been a big driver in the market and may continue to provide leadership.
WisdomTree's ETF is a yield-based product, and it delivers on that score with a 4.02% yield (this is for the index; the fund has yet to pay its first dividend). That compares very favorably with SDY's 2.77% and DVY's 3.46%.
WisdomTree compares DHS to the Russell 1000 Value index. For 10 years, DHS's underlying index beats Russell 1000 Value by approximately 3% annualized and by slightly more than 2% annualized for five years. DHS lags for the last three- and one-year time periods.
While the history of any changes was not available from the WisdomTree Web site, based on the current allocation, I might attribute the recent lag to its underweight position in energy. For comparison sake, the
has 10% in energy and the Russell 1000 Value has 14% in energy.
DHS has more than 400 holdings, compared to 100 for DVY and 50 for SDY. This means that DVY and SDY have much larger cap sizes, close to $40 billion each. But the DHS, despite being so top-heavy, has a median cap size of only $1.5 billion. I should note I was surprised by the $1.5 billion figure, but confirmed it with the company.
Overall, I'm curious to see if DHS tracks closer to the large-cap or small-cap benchmarks over time.