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Top 10 U.S. Large-Cap Sector ETFs


This posting features a comprehensive review of the large-cap ETF sector. To simplify matters for investors, and to be consistent with previous practices, we've highlighted what we feel are the top 10 choices in this category. Doing so makes sorting through the sector more manageable for most investors.

The ETFs chosen represent a broad cross-section of domestic issues from a variety of sponsors. Most issues are seasoned being issued long ago with substantial assets under management and good liquidity. We're not necessarily recommending one issue over another; rather we're trying to feature those issues that aren't repetitive. If other choices are available, these are mentioned where applicable.

Within this sector we have combined choices for growth, value and a blend of these styles. There are occasional periods when value outperforms growth and vice versa, but even over intermediate periods, they tend to achieve the same total return. Others may disagree about this conclusion citing studies demonstrating superior returns of one to the other. However, most of these experiences are transitory and driven by various economic conditions including monetary policies and the overall market environment. But, some investors wish to pursue what they believe is a more conservative value approach while others prefer growth -- both choices are understandable. Again, you are free to choose what suits your own style and objectives best.

SPY (SPDR S&P 500 ETF) tracks the S&P 500 index. It holds the distinction of being the original ETF created by Nate Most for the AMEX in January 1993. (Nate passed away at the age of 90 in 2004 a few months after we had a wonderful lunch with him. His only regret is not having any royalties from his creation. Even then he marveled at how ETFs had grown in popularity.)  AUM (Assets under Management) exceeds $91 billion and average daily trading volume is over 170M shares. The expense ratio is only .10% making it one of the lowest cost ETFs available. With SPY being as popular and large as it is it shouldn't surprise that futures, options and leveraged long/short issues (see reports to follow) are available. The current dividend yield is less than 2% and YTD return as of June 2011 is .80%.

Competitive choices would be IVV (iShares S&P 500 ETF) and could also include VIG (Vanguard Large Cap Blend ETF) among others.

Data as of June 2011

SPY Top Ten Holdings & Weightings

1.      ExxonMobil Corporation ( XOM ):                        3.37%

2.      Apple, Inc. ( AAPL ):                                             2.61%

3.      Chevron Corporation ( CVX ):                               1.71%

4.      General Electric Company ( GE ):                          1.70%

5.      International Business Machines Corp ( IBM ):      1.68%

6.      Procter & Gamble Company ( PG ):                       1.53%

7.      AT&T, Inc. ( T ):                                                     1.52%

8.      Microsoft Corporation ( MSFT ):                           1.50%

9.      Johnson & Johnson ( JNJ ):                                     1.50%

10.  JPMorgan Chase & Co ( JPM ):                              1.40%

RSP (Rydex S&P 500 Equal Weight ETF) also follows the S&P 500 Index but breaks the index up into equal weights vs weighted SPY and IVV. Generally, we prefer using RSP for our portfolios when long given upside returns have been marginally superior. RSP was launched in April 2003. AUM equal $3 billion and average daily trading volume is 900K shares. The expense ratio is .40% which is rather high compared to weighted competitors. The dividend yield is over 1.5% and YTD return as of June 2011 is 2.80%.

Data as of June 2011

RSP Top Ten Holdings & Weightings

  1. National Semiconductor (NSM):        0.33%
  2. Cephalon, Inc. (CEPH):                      0.27%
  3. Abercrombie & Fitch Co. (ANF):       0.27%
  4. Dean Foods Company (DF):              0.26%
  5. Biogen Idec, Inc. (BIIB):                   0.26%
  6. Gamestop Corporation A (GME):      0.25%
  7. Tiffany & Co. (TIF):                           0.25%
  8. Lorillard, Inc. (LO):                            0.25%
  9. Limited Brands, Inc. (LTD):              0.25%
  10. Electronic Arts, Inc. (ERTS):               0.24%

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