This Exchange-Traded Fund is All about Revenues

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

In the long term, the market rewards companies for demonstrating good business fundamentals. Examples include companies that sell goods and services to a large number of people while profiting handsomely by containing costs. Sure, in the short term the market can function as a sort of popularity contest. However, over time there is nothing better than investing in companies bringing in big bucks, and that’s precisely what the RevenueShares Large Cap Fund (RWL) has been designed to do.

RWL deviates from the usual approach of investing in S&P 500 companies based on their market capitalization; it uses a strategy that invests in companies based on their revenues. The fund attempts to outperform the S&P 500 Index by reweighting the securities in the S&P 500 each quarter based on the companies’ revenues. This fund also may hold up to 20% of its investments outside of its benchmark index.

This fund’s strategy helped to produce gains of 35.51% in 2013. So far this year, RWL has jumped 6.91%, while also delivering a yield of 1.46%.

RWL_092414

The top 10 holdings of RWL, as of Sept. 23, make up 20.29% of its assets. These holdings include Wal-Mart Stores, Inc. (WMT), 4.40%; Exxon Mobil Corp. (XOM), 3.64%; Chevron Corp. (CVX), 1.95%; Berkshire Hathaway Class B (BRK-B), 1.76%; and Apple Inc. (AAPL), 1.67%. RWL’s largest sector weightings include consumer non-cyclical, 19.90; consumer cyclical, 18.92%; energy, 13.61%; financial services, 12.72%; industrial, 10.69%; communications, 8.80%; technology, 7.92%; utilities, 3.15%; basic materials, 2.98%; and real estate investment trusts (REITs), 0.51%.

The fund, which last rebalanced its holdings on Sept. 19, currently is overweight in consumer non-cyclical and consumer cyclical companies but underweight in REITs and biotechnology.

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Since RWL rebalances its portfolio on a quarterly basis after earnings announcements, the changes have the potential to erode the value of the holdings. Remember, one reason for investing with ETFs is to take advantage of their attractive fee structure. Therefore, if you plan to buy RevenueShares Large Cap Fund (RWL), the timing may be good to do so fairly soon since the latest quarterly balancing just occurred.

If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please check out my Successful ETF Investing newsletter. As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an e-mail. You just may see your question answered in a future ETF Talk.

In case you missed it, I encourage you to read my e-letter column from last week about a low-volatility smart-beta fund. I also invite you to comment in the space provided below.

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