WisdomTree (NasdaqGS: WETF), one of the pioneers of the currency hedged exchange traded funds phenomenon, is out with a pair of new ETFs today explicitly designed to give investors to companies that benefit from strong and weak dollar environments.
New York-based WisdomTree’s new offerings re the WisdomTree Strong Dollar U.S. Equity Fund (NYSEArca: USSD) and the WisdomTree Weak Dollar U.S. Equity Fund (NYSEArca: USWD). With second-quarter earnings season underway, investors are likely to hear executives from dollar-sensitive, large multinational firms blame the strong greenback for slack profit reports. However, not all sectors are vulnerable to a rising dollar. [Recent Weakness in Dollar ETFs Only a Minor Setback]
Enter the WisdomTree Strong Dollar U.S. Equity Fund. USSD is light on export-heavy sectors that can lag as the dollar rises, including consumer staples and technology. Those sectors combine for less than 13% of the new ETF’s weight, according to issuer data.
Financial services and consumer discretionary, sectors that are as viewed as strong dollar refuges, combine for nearly 45.5% of USSD’s weight. No stock accounts for more than 1.5% of the new ETF’s weight and top 10 holdings include Verizon (NYSE: VZ), Home Depot (NYSE: HD), Wells Fargo (NYSE: WFC) and UnitedHealth (NYSE: UNH).
“But currency moves are not just important to foreign markets. In the U.S, we have also seen U.S. dollar strength impact stocks that are exposed to sales in foreign markets. It is widely known that a significant percentage of the revenues of U.S. companies in the S&P 500 Index come from abroad. These companies have reported large currency headwinds as part of their earnings statements this year,” according to a note out from WisdomTree today.
Investors looking to make a bet on dollar retrenchment can turn to the WisdomTree Weak Dollar U.S. Equity Fund. USWD tracks the WisdomTree Weak Dollar U.S. Equity Index, an index that “employs a modified market capitalization weighing process to tilt weights to companies that have a lower correlation (more negative correlation) to the U.S. dollar,” according to WisdomTree.