The Russell 1000 Enhanced Equal Weight Portfolio tries to reflect the performance of the Russell 1000 Enhanced Value Equal Weight Index, which is comprised of Russell 1000 large-cap companies that exhibit upward price momentum and fair valuations.
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Russell would first exclude those with zero or negative earnings over the past 12 months, screen for value stocks and target securities with greater positive price “momentum.” Lastly, the index is equally weighted, which may cause the fund to tilt toward more mid-sized issuers than a traditional cap-weighted index.
A value stock tends to trade a lower price than the stock would be expected to trade given fundamentals, like dividends, earnings and sales, which may cause the stock to trade at an undervalued price by investors. The index screens for cash flow yield, earnings yield and sales-to-price ratio.
Momentum is the tendency of recent changes in a stock’s price to persist for sometime, so investors are basically betting that high flying stocks with fly even higher due to broad stock market momentum.
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