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An ETF Mr. Burns Would Love

Financials are the largest sector at 23% of the fund, followed by industrials at 20%. Consumer staples, consumer discretionary and utilities each have 11% weightings in the fund.

There is some flexibility on the inclusion criteria. Companies don't necessarily have to have existed in the same form for 100 years to be in the fund. For example, KKR (KKR) is a private equity firm founded in the 1970s. According to PowerShares, it merits a place in the Century ETF by virtue of its investment in Nabisco.

The New York Stock Exchange is the index provider for NYCC. In a backtest that goes back to 2000, the Century ETF's underlying index went up approximately 150%. Compare that to a 40% to 50% increase for various market cap-weighted indices, including the S&P 500.

One of the big market stories from the last 15 years was, of course, the tech wreck. During the period of the backtest, the tech sector as measured by the Technology Select Sector SPDR (XLK) had basically no return.

The tech sector had a 30% weight in the S&P 500 back in 2000 and has always had a weighting in the mid-teens, so it was of course a drag on the performance of the S&P 500 during the backtested period. Tech only comprises 3.25% of NYCC now. Although no information was provided as to tech's weight in the index for the backtest, the nature of the sector is such that very few technology companies are 100 years old.

This does not invalidate the thesis behind the fund. But it does serve to create a favorable backtest versus most broad-based indices. Today the S&P 500 has an 18% allocation to technology. The future of the Century ETF may not be as favorable as it was during the backtest -- that is unless tech puts in another decade of dismal relative performance.


At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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