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

Exchange-Traded Funds With New Spin

As exchange-traded funds are sliced into increasingly smaller segments, industries and regions, Sean O'Hara and his team have taken a novel approach.

As president of RevenueShares Investor Services, O'Hara has helped lead the way in designing ETFs with a new spin. The firm has three ETFs on the market: the RevenueShares Mid Cap Fund (RWK), the RevenueShares Large Cap Fund (RWL) and the RevenueShares Small Cap Fund (RWJ). They track the S&P 400, S&P 500 and S&P 600 indexes, yet they are weighted based on annual revenue rather than market capitalization.

The funds, which rebalance yearly, are rooted in the idea that revenue is a metric less prone to manipulation. "We think we can combine traditional market-cap-weighted index funds with a revenue-weighted strategy to extract excess returns," said O'Hara. "We use revenue because it has proven to generate the highest returns among the factors that we considered for rebalancing."

The slumping stock market has detracted from the funds' ingenuity. Since their launch March 7, RWK, RWL and RWJ have declined 37.5%, 32.2% and 32.4%, respectively, compared with drops of 32.1%, 27.7% and 26.9% for their benchmarks. The weighting of the funds may lead to underperformance in momentum-dominated markets or ones in which one or two sectors are driving gains.

O'Hara said his ETFs ought to come out ahead over longer time periods. From Jan. 1, 1991, through Sept. 30, 2008, the S&P 500 produced an average annualized return of 9.57%. For the same period, RevenueShares' backtested data show that RWL would have returned 12.03%. "Any short-term deficiencies in performance tend to be eliminated over a time horizon of three years or more," said O'Hara.
1 of 2

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
JPM $63.20 0.00%
MSFT $49.87 0.00%
RWK $47.90 0.00%
RWL $40.23 0.00%
RWJ $55.55 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs