Is iShares MSCI USA Equal Weighted ETF (EUSA) a Strong ETF Right Now?

The iShares MSCI USA Equal Weighted ETF (EUSA) made its debut on 05/05/2010, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Blend category of the market.

What Are Smart Beta ETFs?

For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.

Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.

Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.

This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.

Fund Sponsor & Index

Because the fund has amassed over $345.10 M, this makes it one of the average sized ETFs in the Style Box - All Cap Blend. EUSA is managed by Blackrock. Before fees and expenses, EUSA seeks to match the performance of the MSCI USA Equal Weighted Index.

The MSCI USA Equal Weighted Index represents the MSCI USA Index, measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for EUSA are 0.15%, which makes it one of the cheaper products in the space.

The fund has a 12-month trailing dividend yield of 1.49%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Information Technology sector - about 15.60% of the portfolio. Financials and Industrials round out the top three.

Taking into account individual holdings, Global Payments Inc (GPN) accounts for about 0.34% of the fund's total assets, followed by Bristol Myers Squibb (BMY) and Blk Csh Fnd Treasury Sl Agency (XTSLA).

The top 10 holdings account for about 2.45% of total assets under management.

Performance and Risk

Year-to-date, the iShares MSCI USA Equal Weighted ETF has added roughly 26.11% so far, and was up about 15.49% over the last 12 months (as of 12/06/2019). EUSA has traded between $47.02 and $63.02 in this past 52-week period.

The ETF has a beta of 1.07 and standard deviation of 12.39% for the trailing three-year period, making it a medium risk choice in the space. With about 640 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Equal Weighted ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $24.33 B in assets, Vanguard Total Stock Market ETF has $131.42 B. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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iShares MSCI USA Equal Weighted ETF (EUSA): ETF Research Reports
 
Bristol-Myers Squibb Company (BMY) : Free Stock Analysis Report
 
Vanguard Total Stock Market ETF (VTI): ETF Research Reports
 
iShares Core S&P Total U.S. Stock Market ETF (ITOT): ETF Research Reports
 
Global Payments Inc. (GPN) : Free Stock Analysis Report
 
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