Growth stocks and exchange traded funds have been in style this year, but proper selection of this genre’s ETFs is critical to investors’ returns.
In terms of new assets added, growth ETFs topped their value counterparts in the first quarter. Through the first two months of the year, large-cap growth ETFs saw inflows of $1.3 billion, nearly double the sum investors sent to large-cap value ETFs.
“We think this stems from investor interest in ETFs offering greater exposure to more cyclical sectors as the U.S. economy further improves. S&P Capital IQ’s Investment Policy Committee favors the information technology and industrials sectors and notes that both sectors along with consumer discretionary should experience stronger earnings growth than the broader S&P 500 index,” said S&P Capital IQ in a new research. “However, not all growth ETFs are constructed the same.”
The Guggenheim S&P 500 Pure Growth ETF (NYSEArca: RPG) proves the point that not all growth ETFs are the same. RPG, home to $2.15 billion in assets under management, is up 5.4% this year. That is well ahead of the average 3.7% gain posted by the iShares S&P 500 Growth ETF (NYSEArca: IVW) and the Vanguard Growth ETF (NYSEArca: VUG). [Grabbing for Growth ETFs]
“RPG holds just 106 stocks, one third the number of IVW, yet has less concentration at the security level. The top-10 holdings are just 19% of assets,” according to S&P Capital IQ.
No stock accounts for more than 2.65% of RPG’s weight and the ETF is true its growth roots with 27.2% of its weight allocated to technology stocks with another 22.9% going to consumer discretionary names. RPG is also levered to the healthcare boom with a weight of almost 19% to that sector.
As a growth ETF, RPG accentuates biotech, medical device and specialty pharmaceuticals stocks over blue chip pharma names. Of RPG’s 17 healthcare holdings, six are biotech stocks and three are medical device manufacturers. [Why This Healthcare ETF is Surging]
“In addition to reviewing holdings, we focus on ETF level attributes. RPG is above its 200-day moving average and has bullish technical tendencies according to S&P Capital IQ. In addition, the 0.35% expense ratio is relatively modest compared to the broader equity ETF universe. On average, 175,000 shares trade on a daily basis and with a $0.03 bid/ask spread. Meanwhile, the ETF trades at a 4 basis point premium to its net asset value,” said S&P Capital IQ.
Investors have allocated $202.6 million to RPG this year after pouring $758.3 million into the ETF last year. RPG charges 0.35% per year.
Guggenheim S&P 500 Pure Growth ETF
