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WisdomTree High-Yield ETF Stands Apart

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 S&P 500 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.

At the time of publication, Nusbaum was long Bank of America as a client holding, although positions may change at any time.

Roger Nusbaum is a portfolio manager with Your Source Financial of Phoenix, Ariz., and the author of Random Roger's Big Picture Blog. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Nusbaum appreciates your feedback; click here to send him an email.

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