Market Overview

S&P Likes SPDR Dow Jones Large Cap ETF

There's no shortage of ETFs focusing on U.S. large-caps. In fact, U.S. large-caps are the most easily accessible asset class among equity-based ETFs. Even with hundreds of funds to choose from, many with similar holdings and expense ratios, it's possible for one fund to standout.

That's the view of S&P Capital IQ, which highlights the SPDR Dow Jones Large Cap ETF (NYSE: ELR) in a research note. ELR tracks the Dow JonesĀ U.S. Large Cap Total Stock Market Index and is home to 748 stocks with a weighted average market cap of $99.6 billion. ELR, which debuted in November 2005, sports an expense ratio of 0.2% and $41.71 million in assets under management.

The fund earned S&P Capital IQ's highest overall ETF ranking of Overweight.

"ELR is one of approximately 167 equity ETFs for which S&P Capital IQ had an overall Overweight ranking as of April 20, 2012. We believe ELR has attractive characteristics, not the least of which is that the ETF offers a relatively low-cost way to obtain broad exposure to the U.S. stock market, which S&P Capital IQ currently believes has good fundamentals," the research firm said in the note.

ELR's top-10 holdings, which include nine Dow components, account for approximately 19% of the fund's weight. Apple (Nasdaq: AAPL) is the fund's largest weight with an allocation of 3.96%. Other top holdings include Exxon Mobil (NYSE: XOM), Microsoft (Nasdaq: MSFT), International Business Machines (NYSE: IBM) and Chevron (NYSE: CVX).

The ETF offers exposure to all 10 of the sector groups tracked in the S&P 500 with technology receiving an allocation of 19.8% and financials placing second with a weight of almost 15%. Consumer discretionary, health care, energy, consumer staples and industrial names also garner double-digit allocations.

The ETF gets an Overweight ranking in the performance analytics category. This reflects a positive outlook on the ETF's holdings based on S&P STARS, and neutral views for the S&P Fair Value, and S&P technical inputs. Within the Top-10 holdings, S&P Capital IQ Equity Research has a Strong Buy, or 5-STARS, opinion on two names, and a Buy, or 4-STARS, opinion on seven more names, S&P said in the note.

ELR also commands Overweight ratings in S&P's cost factors and risk consideration categories.

In endorsing ELR, S&P said "U.S. exposure is preferable to overseas exposure on a tactical basis."

"With concerns about the extent to which the slowdown in China may turn into a hard landing given the PBOC's reluctance to cut interest rates in the face of still high property prices, commodity-sensitive regions like Canada, Australia and emerging markets have lagged of late. In addition, commodity-sensitive sectors like Energy and Materials have underperformed globally, and foreign equity benchmarks tend to have greater weightings than their U.S. counterparts. Given these emerging global risks, we believe it is preferable to pick investments with higher domestic exposure," the research firm said.

Follow me on Twitter: @ETFProfesor1

Posted-In: Analyst Color Long Ideas News Broad U.S. Equity ETFs Short Ideas Intraday Update Markets Analyst Ratings

 

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