Exchange Traded Funds (ETFs)

Invest in U.S. Banks with This Fund

The SPDR S&P Bank ETF (KBE) tracks an equal-weighted index of U.S. banking stocks and generally will invest at least 80% of its total assets in such financial services companies.

The index represents the bank segment of the S&P Total Market Index and comprises the following sub-industries: Asset Management & Custody Banks, Diversified Banks, Regional Banks, Other Diversified Financial Services and Thrifts & Mortgage Finance. The index is also equally weighted at each quarterly rebalancing, which puts giant banks on equal footing with smaller ones (at rebalance at least) and increases the emphasis on smaller firms overall than a market-cap-weighted fund.

KBE fills a niche market by providing exposure to a broad selection of banks in an equal-weighted manner. The ETF has amassed an impressive $4 billion in assets under management. With a 0.35% expense ratio, the fund is relatively inexpensive to hold in relation to other ETFs.

Source: StockCharts.com

The fund trades around $53-54 and has an attractive 2.23% distribution yield. As the chart above shows, KBE’s share price has grown a whopping 80% over the trailing 12-month period to beat its index’s 21.99% return during the same time. The fund also is up 21.91% so far this year, compared to a gain of 7% for its index.

The top three holdings in the fund, and their percentage of KBE’s assets, are MGIC Investment Corp., 1.65%; Essent Group Ltd., 1.64%; and Wells Fargo & Co., 1.61%. The fund holds a total of 96 equities.

With strong fundamentals and a seasoned management team, this fund is poised to continue growing higher. However, I do urge all interested investors to exercise their own due diligence in deciding whether this fund fits their own individual portfolio goals.

Exclusive ETF Talk: Tapping into the Power of Language with This Communications ETF

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.