By Todd Rosenbluth, CFRA

The CFRA Focus ETF for October is Invesco S&P 500 Equal Weight ETF (RSP), which earns our top rating of Overweight. Rather than relying solely on past performance, as some fund rating providers do, we incorporate holdings-level and fund-focused metrics such as expense ratio and trading costs.

Relative to the SPDR S&P 500 Index (SPY), the oldest and largest ETF that tracks the prominent S&P 500 Index, RSP has underperformed slightly year-to-date through September 25 (20.1% vs. 20.8%) and lagged on a three-year annualized basis (10.9% vs. 13.4%). There is a slight expense ratio spread between the two funds, as RSP’s 0.20% expense ratio is 11 basis points higher. But, to CFRA, the performance differential and indeed the appeal of RSP stems from the portfolio construction distinction.

At the sector level, both ETFs held the most exposure in Information Technology, but RSP’s 14% weighting at the end of August was much smaller than SPY’s 22%. CFRA Buy recommended Symantec Corp (SYMC) was one of RSP’s larger tech positions, with just a 0.24% weighting.

Beyond the portfolio, CFRA finds RSP appealing. CFRA thinks the fund is trading with bullish technical trends as it is above its 200-day moving average. RSP’s 0.20% expense ratio is relatively low for an equity ETF and is half what the fund charged two years earlier. In addition, the fund trades with a tight bid/ask spread of just $0.03. RSP has an average daily trading volume in the last six months of 620,000 shares, equal to $66 million, which supports its liquidity.

Todd Rosenbluth is Director of ETF & Mutual Fund Research at CFRA.

This thematic research was originally published on MarketScope Advisor. CFRA looks to continually improve the quality and delivery of our research. To ensure that you continue to receive this and other relevant content from CFRA, please submit your contact details here.

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