There are plenty of ways to spin a sector exchange traded fund, including traditional market capitalization weighting and equal weighting. Other sector ETFs take the intelligent indexing theme further by employing growth and values into the screen process.
Then there is revenue weighting, an approach that has worked with the RevenueShares Large Cap Fund (NYSEArca: RWL). RWL, which celebrated its sixth anniversary last month, also features a valuation component to steer its weight away from stocks that could be perceived as overvalued. The fund is the revenue-weighted alternative to cap-weighted S&P 500 funds. [Different Spin on S&P 500 ETFs]
The RevenueShares Financials Sector Fund (NYSEArca: RWW) shows revenue weighting can work at the sector level. RWW debuted in November 2008, a launch date that initially looked like a case of poor timing, but the ETF has managed to gain nearly 170% since then.
Weighing its 81 holdings by revenue means RWW features Warren Buffett’s Berkshire Hathaway (NYSEArca: BRK-B) as its top holding, a rarity among financial services ETFs that are often dominated by large-cap money center banks.
Investors looking for exposure to the largest U.S. banks will not be disappointed with RWW as the revenue weighting methodology leads to Bank of America (NYSE: BAC), J.P. Morgan Chase (NYSE: JPM), Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C).