This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Fundamental Funds Topped the S&P 500


NEW YORK ( TheStreet ) -- The RevenueShares family of ETFs has been on a roll.

Top performers include RevenueShares Large Cap (RWL). During the past five years, the fund returned 9.2% annually, compared to 7.8% for the S&P 500, according to Morningstar. RevenueShares Small Cap (RWJ) returned 13.6% annually, compared to 8.3% for the Russell 2000 small-cap index.

The ETF company has achieved those stellar results by relying on a simple methodology that focuses on revenue. To assemble the large-cap portfolio, RevenueShares starts with the 500 stocks of the S&P 500. Then the company weights the stocks according to their sales. If a company accounts for 2% of the revenue in the S&P 500, then the stock will have 2% of the assets in the ETF.

In contrast, the S&P 500 and most other standard benchmarks weight holdings according to the market values of the stocks. For RevenueShares Large Cap, the biggest holding is Wal-Mart (WMT), which accounts for 4.2% of assets. The giant retailer only accounts for 0.85% of the assets in the S&P 500.

The RevenueShares ETFs are among the most successful funds that follow fundamental approaches. Those weight stocks according to fundamental measures such as revenue, dividends or earnings. Introduced by Research Affiliates in 2005, fundamental strategies now account for $100 billion in assets invested in institutional and retail funds. Successful fundamental ETFs include PowerShares FTSE RAFI 1000 (PRF) and WisdomTree Total Dividend (DTD).

Proponents say fundamental funds can perform so well because they overcome the flaws of market-cap-weighted benchmarks. To appreciate why, consider how the weighting of the S&P 500 shifted during the late 1990s bull market.

At the time, prices of big technology stocks were soaring. As that happened, companies including Cisco Systems (CSCO) and Intel (INTC) came to account for an increasing percentage of assets in the index. When the Internet bubble burst in 2000, the S&P 500 fell hard as technology stocks sank.

Fundamental benchmarks avoid such steep collapses because they don't overweight the hottest stocks. Since measures such as revenue are fairly steady, the stock allocations of fundamental benchmarks tend to avoid sudden shifts.

1 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs