As Earnings Kick Off, These ETFs Weight by Revenue, Profits
April 11th at 2:00am by Tom Lydon
Alcoa’s first-quarter results Monday start the earnings season as Wall Street gets its latest update on the health of corporate America.
Investors can capitalize on the potentially greater fortunes of U.S. companies through earnings- or revenue-based exchange traded funds (ETFs).
Indexing based on revenues, rather than a company’s size, may be an appealing strategy for an economic cycle entering a recovery mode. [The Benefits of Revenue-Weighted ETFs.]
The ultimate objective in revenue-weighting is to maintain an index with a lower price-to-sales ratio, which shows measurable benefits. Intuitively, weighting by revenue makes sense because bigger revenues usually mean bigger profits and better businesses.
RevenueShares‘ suite of revenue-weighted ETFs includes:
- RevenueShares Large Cap Fund (NYSEArca: RWL)
- RevenueShares Mid Cap Fund (NYSEArca: RWK)
- RevenueShares Small Cap Fund (NYSEArca: RWJ)
- RevenueShares Financials Sector Fund (NYSEArca: RWW)
- RevenueShares ADR Fund (NYSEArca: RTR)
- RevenueShares Navellier Overall A-100 Fund (NYSEArca: RWV)
Alternatively, investors could also consider WisdomTree‘s lineup of earnings-based ETFs which includes:
- WisdomTree Total Earnings Fund (NYSEArca: EXT)
- WisdomTree Earnings 500 Fund (NYSEArca: EPS)
- WisdomTree MidCap Earnings Fund (NYSEArca: EZM)
- WisdomTree SmallCap Earnings Fund (NYSEArca: EES)
- WisdomTree LargeCap Value Fund (NYSEArca: EZY)
- WisdomTree LargeCap Growth Fund (NYSEArca: ROI)
The WisdomTree Earnings 500 Fund tracks a benchmark of the the 500 largest U.S. companies. The index is earnings-weighted once a year in December. “Companies with greater earnings generally have larger weights in the index,” WisdomTree says.
For more information on revenue weighting, visit our revenue weighting category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.