This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

New ETFs Turn Value Into Aggressive Growth

February was a big month for launching exchange-traded funds, with 53 new ETFs. Seven of them trade on foreign exchanges, with the remaining 46 listed on the NYSE, Nasdaq and American Stock Exchange.

ProShares introduced 12 more ETFs that employ 200% leverage by tracking six Russell indices. Half of the funds take the long side, betting that the underlying index rises. The other half play the short side, looking for a decline.

Officially, the Russell Investment Group separates the members of its Russell 3000 Index of U.S. companies into two groups. The 1,000 stocks with the largest market capitalization go into the Russell 1000 Index. The smallest 2,000 go into the Russell 2000 Index, considered a small-cap benchmark. The Russell Mid-cap Index includes the 800 smallest companies from the Russell 1000 Index.

In reality, due to corporate activities such as mergers, buyouts or bankruptcies, the 3000 Index has only 2,905 members, with 979 in the 1000 Index and 1,926 in the 2000 Index. Of the 979, Russell considers 776 of them to be mid-cap.

The growth and value indices are constructed based on the price-to-book ratios and forecasted growth of the index members. Generally, higher price-to-book ratios and higher expected growth rates signify growth stocks. Lower financial statistics would imply value stocks.

Surprisingly, of the 979 stocks in the Russell 1000 Index, 607 are members of the Russell 1000 Value Index and 678 are Growth Index members. At first glance, this doesn't add up. Russell Investment Group says that each stock has a probability of being growth or value.

If the probability is 40% growth and 60% value, then the stock is allocated 40% to the growth index and 60% to the value index. About 30% of stocks have some portion in both value and growth indexes.

The last bit of accounting magic is the use of leverage. These new ETFs use 200% leverage in an attempt to return twice the performance of the underlying indices. That results in the three value-oriented funds being classified as aggressive growth funds.

The UltraShort funds are considered contrarian funds targeting gains twice the size of index losses. Maybe some day there will be an aggressive contrarian category with the UltraShort funds as charter members.

New ProShares ETFs Play Both Sides of Russell Indices
Index Name Ultra 200% UltraShort -200%
Russell 1000 Growth Index UKF SFK
Russell 1000 Value Index UVG SJF
Russell MidCap Growth Index UKW SDK
Russell MidCap Value Index UVU SJL
Russell 2000 Growth Index UKK SKK
Russell 2000 Value Index UVT SJH
Source: American Stock Exchange
Kevin Baker became the senior financial analyst for TSC Ratings upon the August 2006 acquisition of Weiss Ratings by, covering mutual funds. He joined the Weiss Group in 1997 as a banking and brokerage analyst. In 1999, he created the Weiss Group's first ratings to gauge the level of risk in U.S. equities. Baker received a B.S. degree in management from Rensselaer Polytechnic Institute and an M.B.A. with a finance specialization from Nova Southeastern University.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
SJF $0.00 0.00%
UVG $0.00 0.00%
SFK $0.00 0.00%
UKW $116.13 0.00%
UVU $0.00 0.00%


Chart of I:DJI
DOW 15,914.74 -99.64 -0.62%
S&P 500 1,851.86 -0.35 -0.02%
NASDAQ 4,283.5920 +14.8290 0.35%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs