Greetings!
Below please find the ETF Spotlight newsletter for
the week of May 24th, containing highlights of the research and
data on www.etfresearchcenter.com
as well as a recap of the past week's action in the ETF market. The focus of this week's edition is profitability in relation to owner's equity. Feel free to share it with others who may be interested. |
In this week's issue
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 Return on Equity
- Chart of the week: ETFs with the highest average ROE
- Fund Focus: Vanguard Dividend Appreciation (VIG)
- Revisions, asset flows & short interest
- Book Value estimates, growth rates and P/BV multiples for major ETFs
- Market monitor - movers & categories
To download the full newsletter click here. |
| Chart of the week
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ETFs with the highest average ROE
Highest Avg. ROE
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Earnings growth tends to get a lot of focus in the media, but it's easy to grow earnings if you "buy" growth by investing huge amounts of money. We think a more informative measure is Return on Equity, which measures the profits a firm generates in relation to what shareholders have invested in the business. Further, since most businesses are at least somewhat cyclical, it makes sense to examine average profitability over the course of the business cycle, so investors can compare how efficient one sector may be versus another in its use of shareholders' capital. This week's chart shows the ETFs with the highest average ROE (based on the funds' constituents). Although many Growth funds make the list as you might expect, they do not have particularly high ALTAR Scores, meaning they may be richly valued in relation to their admittedly high levels of profitability. One fund making the list, the Vanguard Dividend Appreciation fund (VIG) is the subject of this week's Fund Focus. To download the full newsletter, click here. |
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Fund Focus |
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Vanguard Dividend Appreciation (VIG)
Unlike many dividend-oriented funds, this one is remarkably well diversified among sectors, the overall earnings decline last year was modest, and the historical growth rate in book value and especially dividends has been stellar. However, the fund's yield isn't much better than that of the S&P500 (SPY) and valuation multiples are similar. As a result, VIG is not the "deep value" play that some other dividend-oriented funds appear to be at present.
To download the full newsletter, click here.
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