ETF Chart of the Day: RevenueShares Weight Stocks by Sales | ETF Trends

An ETF fund family that emerged in 2008 is known as RevenueShares, and applies a small modification to known “market cap weighted” indexes from S&P, known as “revenue weighting.”

In other words, the funds’ holdings are identical name for name with the S&P market cap weighted indexes but instead of the individual weightings being determined by the market capitalizations of the companies, their top line reported revenue numbers are the key to the weighting methodology.

RWL (RevenueShares Large Cap), RWK (RevenueShares Mid Cap), and RWJ (RevenueShares Small Cap) all contain the same stocks as their respective S&P market cap weighted indexes, but one will notice that the individual weightings are aligned differently in accordance with the top line reported revenue numbers, and re-balanced on a monthly basis.

RWL for instance has top holdings currently of WMT (4.32%), XOM (4.26%), CVX (2.14%), PSX (1.85%), and COP (1.81%) which is in noticeable contrast to the S&P 500 Index, which is weighted currently as follows: AAPL (4.30%), XOM (3.19%), GE (1.75%), CVX (1.63%), IBM (1.60%).

As one might expect, the disparity across weightings is even more pronounced in the mid cap and small cap spaces, because “revenue” and “market capitalizations” are certainly very different ways to approach index construction. In addition to the core funds mentioned above, RWW (RevenueShares Financials Sector) also exists, and has demonstrated very impressive out-performance in 2012 (+34.96% versus XLF (SPDR Financials) up 23.03% during the same time frame).

To understand the out-performance here in 2012 in RWW, one can look at the underlying holdings of the fund which are BRK.B (10.23%), BAC (8.69%), C (7.99%), JPM (7.69%), and WFC (6.12%). [Global ETF Ranks Stocks by Revenue]