Top 9 Large-Cap ETFs

NEW YORK ( ETF Digest) -- This posting features a comprehensive review of the large-cap ETF sector. In this category, there aren't many more ETFs than just the 9 we've featured given the tsunami of ETF issuance.

Some major issues have been divided into value, growth and blended segments. Nevertheless, to simplify matters for investors, and to be consistent with previous practices, we're still just highlighting what we feel are reasonable top 9 choices. These may be repetitive but we have also featured the leading "value" ETF, an ETF linked to a popular "enhanced" index and various "all-cap" ETFs.

Remember, being the first to market in any sector is most important to issuers and this is much more important in major market sector ETFs like large-caps. In fact, according to Lipper's Jeff Tjornehoj, as of 2012 nearly half of existing ETF assets are found in just two dozen funds with over 1,000 ETFs now issued. The following top 9 issues hold an outsized percentage of these assets.

The issues 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 just 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 even 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 are 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.

For those wishing to hedge or speculate ProShares and DirexionShares offer inverse short and leveraged long/short issues.

We rank the top 9 ETFs by our proprietary stars system as outlined below. However, given that we're sorting these by both short and intermediate issues we have split the rankings as we move from one classification to another.


Strong established linked index
Excellent consistent performance and index tracking
Low fee structure
Strong portfolio suitability
Excellent liquidity


Established linked index even if "enhanced"
Good performance or more volatile if "enhanced" index
Average to higher fee structure
Good portfolio suitability or more active management if "enhanced" index
Decent liquidity


Enhanced or seasoned index
Less consistent performance and more volatile
Fees higher than average
Portfolio suitability would need more active trading
Average to below average liquidity


Index is new
Issue is new and needs seasoning
Fees are high
Portfolio suitability also needs seasoning
Liquidity below average

We feature a technical view of conditions from monthly chart views. Simplistically, we recommend longer-term investors stay on the right side of the 12 month simple moving average. When prices are above the moving average, stay long, and when below remain in cash or short. Some more interested in a fundamental approach may not care so much about technical issues preferring instead to buy when prices are perceived as low and sell for other reasons when high; but, this is not our approach.

Premium members to the ETF Digest receive added signals when markets become extended such as DeMark triggers to exit overbought/oversold conditions.

For traders and investors wishing to hedge, leveraged and inverse issues are available to utilize from ProShares and Direxion and where available these are noted.

#9: PowerShares Dynamic Market ETF (PWC)

PWC follows the Dynamic Market Intellidex Index which is and "enhanced" index comprised of U.S. stocks from each sector identified as having the greatest capital appreciation potential pursuant to a proprietary Amex Intellidex quantitative methodology.

These characteristics include lower price to book, higher dividends and lower PE ratios among other considerations. The fund was launched in May 2000. The expense ratio is .60%. AUM equal $140M and average daily trading volume less than 8K shares. As of early February 2012 the annual dividend yield was roughly 1.05% and YTD return 4.88%. The one year return was -2.56%.

Remember enhanced indexes can substantially outperform on the upside but underperform on the downside. PWC has been around for quite some time and has been a good performer overall in this regard.

Data as of First Quarter 2012

PWC Top Ten Holdings & Weightings
  1. Marathon Oil Corp (MRO): 4.69%
  2. Valero Energy Corporation (VLO): 4.55%
  3. Philip Morris International, Inc. (PM): 3.65%
  4. Costco Wholesale Corporation (COST): 3.61%
  5. Dell Inc (DELL): 2.79%
  6. Alliance Data Systems Corporation (ADS): 2.77%
  7. Visa, Inc. (V): 2.74%
  8. MasterCard Incorporated A (MA): 2.72%
  9. Motorola Solutions, Inc. (MSI): 2.69%
  10. CF Industries Holdings Inc (CF): 2.67%

#8: iShares DJ U.S. Total Market ETF (IYY)

IYY follows the Dow Jones U.S. Index which measures the performance of the U.S. equity broad markets making it an All Cap Index. The fund was launched in June 2000.

The expense ratio is .20%. AUM equal $546 million and average daily trading volume is 80K shares. As of early February 2012 the annual dividend yield is 1.84% and YTD return 4.96%. The one year return was 3.80%.

Data as of First Quarter 2012

IYY Top Ten Holdings & Weightings
  1. Exxon Mobil Corporation (XOM): 3.07%
  2. Apple, Inc. (AAPL): 2.84%
  3. International Business Machines Corp (IBM): 1.64%
  4. Chevron Corp (CVX): 1.61%
  5. Microsoft Corporation (MSFT): 1.47%
  6. General Electric Co (GE): 1.43%
  7. The Procter & Gamble Co (PG): 1.38%
  8. AT&T Inc (T): 1.36%
  9. Johnson & Johnson (JNJ): 1.35%
  10. Pfizer Inc (PFE): 1.26%

#7: iShares S&P 500 Value ETF (IVE)

IVE follows the S&P 500/Citigroup Value Index which carves out those securities with value characteristics from the S&P 500 index. The fund was launched in May 2000. The expense ratio is .18%. AUM equals $4.3 billion and average daily trading volume exceeds 482K shares.

As of early February 2012 the annual dividend yield is 2.29% and YTD return 5.01%. The one year return was 1.80%.

Data as of First Quarter 2012

IVE Top Ten Holdings & Weightings
  1. General Electric Co (GE): 3.63%
  2. AT&T Inc (T): 3.44%
  3. Pfizer Inc (PFE): 3.20%
  4. Exxon Mobil Corporation (XOM): 2.81%
  5. Wells Fargo & Co (WFC): 2.79%
  6. Berkshire Hathaway Inc B (BRK.B): 2.58%
  7. JPMorgan Chase & Co (JPM): 2.43%
  8. Chevron Corp (CVX): 1.87%
  9. Cisco Systems Inc (CSCO): 1.87%
  10. ConocoPhillips (COP): 1.86%

 

#6: iShares Russell 1000 Growth ETF (IWF)

IWF follows the top 1000 growth stocks within the Russell 3000 Index. The fund was launched in May 2000. The expense ratio is .20%. AUM equal $15 billion with average daily trading volume 2.8M shares.

As of early February 2012 the annual dividend yield was 1.39% and YTD return 6.13%. The one year return was 6.80%.

Note this is a "growth" oriented index structure and the holdings very much reflect this.

Data as of First Quarter 2012

IWF Top Ten Holdings & Weightings
  1. Apple, Inc. (AAPL): 5.81%
  2. Exxon Mobil Corporation (XOM): 4.78%
  3. International Business Machines Corp (IBM): 3.46%
  4. Microsoft Corporation (MSFT): 2.99%
  5. Google, Inc. (GOOG): 2.52%
  6. The Coca-Cola Co (KO): 2.14%
  7. Philip Morris International, Inc. (PM): 1.96%
  8. PepsiCo Inc (PEP): 1.63%
  9. McDonald's Corporation (MCD): 1.62%
  10. Oracle Corporation (ORCL): 1.53%

#5: iShares Russell 1000 Index ETF (IWB)

IWB tracks largest 1000 stocks within the Russell Index. The fund was launched in May 2000. The expense ratio is .15%. AUM equals $6.6 billion and daily trading volume is roughly 1.2M shares. As of early February 2012 the annual dividend yield is 1.93% and YTD return 5.01%. The one year return was 4.68%.

Note: This is a Large-Cap index clearly.

Data as of First Quarter 2012

IWB Top Ten Holdings & Weightings
  1. Exxon Mobil Corporation (XOM): 3.23%
  2. Apple, Inc. (AAPL): 2.90%
  3. International Business Machines Corp (IBM): 1.72%
  4. Chevron Corp (CVX): 1.66%
  5. Microsoft Corporation (MSFT): 1.49%
  6. General Electric Co (GE): 1.47%
  7. The Procter & Gamble Co (PG): 1.44%
  8. Johnson & Johnson (JNJ): 1.39%
  9. AT&T Inc (T): 1.39%
  10. Pfizer Inc (PFE): 1.32%

#4: Vanguard Total Market ETF (VTI)

VTI tracks the MSCI U.S. Broad Market Index. The index represents 99.5% of the total market capitalization of the U.S. common stocks traded on the major markets. The fund was launched in May 2001. The expense ratio is only.06%. AUM equal $20.7 billion and average daily trading volume exceeds 1.9M shares. As of early February 2012 the annual dividend yield is 1.92% and YTD return 5.07%. The one year return was 3.95%.

Note: The most popular of the "All Cap" sector issues.

Data as of First Quarter 2012

VTI Top Ten Holdings & Weightings
  1. Exxon Mobil Corporation (XOM): 2.84%
  2. Apple, Inc. (AAPL): 2.80%
  3. International Business Machines Corp (IBM): 1.68%
  4. Microsoft Corporation (MSFT): 1.50%
  5. Chevron Corp (CVX): 1.48%
  6. The Procter & Gamble Co (PG): 1.40%
  7. Johnson & Johnson (JNJ): 1.39%
  8. AT&T Inc (T): 1.34%
  9. General Electric Co (GE): 1.28%
  10. Pfizer Inc (PFE): 1.11%

#3: SPDR Dow Jones Industrial Average ETF (DIA)

DIA follows the popular Dow Jones Industrial Average Index of 30 stocks which is a "price-weighted" Index meaning the highest priced stocks carry more weight which you can see in the top holdings below. The fund was launched in January 1998. The expense ratio is .16%.

AUM equal $12 billion and average daily trading volume is 7.5M shares. As of early February 2012 the annual dividend yield is 2.44% and YTD return 3.73%. The one year return was 7.10%.

Data as of First Quarter 2012

DIA Top Ten Holdings & Weightings
  1. International Business Machines Corp (IBM): 11.36%
  2. Chevron Corp (CVX): 6.57%
  3. McDonald's Corporation (MCD): 6.20%
  4. Caterpillar Inc (CAT): 5.60%
  5. Exxon Mobil Corporation (XOM): 5.24%
  6. 3M Co (MMM): 5.05%
  7. The Boeing Co (BA): 4.53%
  8. United Technologies Corp (UTX): 4.52%
  9. The Coca-Cola Co (KO): 4.32%
  10. The Procter & Gamble Co (PG): 4.12%

#2: Rydex S&P 500 Equal Weight ETF (RSP)

 

RSP also follows the S&P 500 Index but breaks the index up into equal weights vs weighted like SPY and IVV. Generally, we prefer using RSP for some of our portfolios when long given upside returns have been marginally superior. RSP was launched in April 2003. The expense ratio is .40%. AUM equal $2.9 billion and average daily trading volume is 992KM shares.

As of early February 2012 the annual dividend yield is 1.55% and YTD return 5.70%. The one year return was 3.77%

Data as of First Quarter 2012

RSP Top Ten Holdings & Weightings
  1. Cablevision Systems A (CVC): 0.24%
  2. Akamai Technologies, Inc. (AKAM): 0.23%
  3. Masco Corporation (MAS): 0.23%
  4. DeVry, Inc. (DV): 0.22%
  5. Cintas Corporation (CTAS): 0.22%
  6. Tenet Healthcare Corp (THC): 0.22%
  7. Weyerhaeuser Co (WY): 0.22%
  8. Micron Technology, Inc. (MU): 0.22%
  9. Zimmer Holdings Inc (ZMH): 0.22%
  10. CF Industries Holdings Inc (CF): 0.22

#1: SPDR S&P 500 ETF (SPY)

SPY 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.)

The expense ratio is only .09%.  AUM (Assets under Management) equal $100 billion and average daily trading volume is over 191M shares. As of early February 2012 the annual dividend yield is 2.05% and YTD return 4.68%. The one year return was 5.01%.

Data as of First Quarter 2012

SPY Top Ten Holdings & Weightings
  1. Exxon Mobil Corporation (XOM): 3.55%
  2. Apple, Inc. (AAPL): 3.29%
  3. International Business Machines Corp (IBM): 1.89%
  4. Chevron Corp (CVX): 1.85%
  5. Microsoft Corporation (MSFT): 1.70%
  6. General Electric Co (GE): 1.65%
  7. The Procter & Gamble Co (PG): 1.60%
  8. AT&T Inc (T): 1.57%
  9. Johnson & Johnson (JNJ): 1.56%
  10. Pfizer Inc (PFE): 1.45%

 

The above list of ETFs combined contains most of the AUM (Assets under Management) in the domestic U.S. ETF space. Add in a half dozen or so overseas sectors (EFA, EEM, VWO and so forth) and you'll quickly get to half the overall AUM in the ETF space. There isn't much to parse in this regard.

It's also important to remember that ETF sponsors have their own competitive business interests when issuing products which may not necessarily align with your investment needs. New ETFs from highly regarded and substantial new providers are also being issued. These may include Charles Schwab's ETFs and Scottrade's Focus Shares which both are issuing new ETFs with low expense ratios and commission free trading at their respective firms. These may also become popular as they become seasoned. 

For further information about portfolio structures using technical indicators like DeMark and other indicators, take a free 14-day trial at ETF Digest . Follow us on Twitter and Facebook as well and join our group conversations.

You may address any feedback to: feedback@etfdigest.com   

The ETF Digest has current positions in VTI and IVE.

(Source for data is from ETF sponsors and various ETF data providers)

 

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.

Dave Fry is founder and publisher of ETF Digest, Dave's Daily blog and the best-selling book author of Create Your Own ETF Hedge Fund, A DIY Strategy for Private Wealth Management, published by Wiley Finance in 2008. A detailed bio is here: Dave Fry.

More from ETFs

What Bad Weather? Kohl's Shares Spike as Same-Store Sales Jump

What Bad Weather? Kohl's Shares Spike as Same-Store Sales Jump

Listen: Here's What You Need To Know About ETFs Today (Hint: They're on Fire!)

Listen: Here's What You Need To Know About ETFs Today (Hint: They're on Fire!)

Bitcoin Today: Bears Rear Their Heads as Prices Continue Downward Spiral

Bitcoin Today: Bears Rear Their Heads as Prices Continue Downward Spiral

Cannabis Stocks Are Screaming Sells After Seeing This Deal: Doug Kass Insider

Cannabis Stocks Are Screaming Sells After Seeing This Deal: Doug Kass Insider

60 Seconds: What's the Difference Between an ETF and a Mutual Fund?

60 Seconds: What's the Difference Between an ETF and a Mutual Fund?