Although the health care sector is the third-largest in the S&P 500, occupying 13.3% of the benchmark U.S. index’s weight, the biotechnology sub-industry is not a big part of the S&P 500’s weight.
Last month, that proved to be a good thing because as the iShares Nasdaq Biotechnology ETF (NasdaqGM: IBB) tumbled 10.4%, the S&P 500 was able to cobble together a 1.5% March gain. However, the cap-weighted S&P 500 was shown up by the revenue-weighted RevenueShares Large Cap Fund (NYSEArca: RWL) and some of that showing up can be attributed to RWL’s relatively scant biotech exposure. [Health Care ETFs Survive Biotech Slump]
Gilead Sciences (NasdaqGS: GILD) holds the largest weight among biotech stocks in the S&P 500 at 0.65%. Amgen (NasdaqGS: AMGN) is next at 0.56%. The rest of the biotech “Big Five” – Biogen (NasdaqGS: BIIB), Celgene (NasdaqGS: CELG) and Regeneron (NasdaqGS: REGN) combine for just 0.91% of the S&P 500.
That is not a enough to cause a calamity when biotech slides as it the group did in March, but it is enough to highlight a decent-sized gap between the S&P 500 and RWL last month. The revenue-weighted ETF gained 2.4%. The ETF is underweight health care with an allocation of 11.5%, according to RevenueShares data.
Amgen is the ETF’s largest biotech holding at a meager weight of 0.17%, the same weight RWL allocates to the likes of General Mills (NYSE: GIS) and Altria (NYSE: MO). Gilead and Biogen combine for just 0.16% of RWL.
RWL’s lineup has the potential to surprise investors accustomed to traditional S&P 500 ETFs. For example, Wal-Mart (NYSE: WMT) is RWL’s largest holding at almost 4.1% of the fund’s while Apple (NasdaqGS: AAPL), SPY’s largest holding, is relegated to the sixth spot in RWL. Phillips 66 (NYSE: PSX) has a larger weight in RWL than Apple and ConocoPhillips (NYSE: COP), the company that spun Phillips 66 off. [A Winning Revenue-Weighted ETF]
RWL has outpaced the S&P 500 by over 500 basis points over the past three years.
RevenueShares Large Cap Fund
ETF Trends editorial team contributed to this piece. Tom Lydon’s client own shares of Apple.