PowerShares launched a suite of small-cap sector ETFs based on the S&P SmallCap 600 Index yesterday (4/7/10). These nine new ETFs are the first to provide sector-specific exposure within the U.S. small-cap stock market.
I have long been a fan of sector and industry-focused funds, and I warmly welcome these products. One of my displeasures with the popular SPDR S&P Select Sector ETFs is that they are extremely top-heavy, mostly dominated by just a few stocks.
S&P divides the US market into three major market capitalizations: S&P 500 Large Cap, S&P MidCap 400, and S&P SmallCap 600. Together they form the S&P 1500. There should be no overlap between the holdings SPDR S&P Select Sector family (which only includes stocks from the S&P 500) and the new PowerShares S&P SmallCap Sector family. In fact, there is a gap between the two families, namely the 400 stocks belonging to the S&P MidCap 400 Index.
When bought in the correct proportions, these nine new ETFs should exactly represent the S&P SmallCap 600 Index, just like the SPDR Select Sector ETFs can replicate the S&P 500 when properly allocated. Keep in mind, however, that the sector proportions are not the same for both indexes.
The new PowerShares funds all have an expense ratio of 0.29%. Investors familiar with the popular S&P Select Sector SPDR ETFs should have no trouble learning the new ticker symbols – just add an “S” for small to the end of the SPDR ticker symbol.
PowerShares S&P SmallCap Consumer Discretionary Portfolio (XLYS) (overview) (holdings) currently has 113 holdings and represents 16.7% of the S&P SmallCap 600 Index. The top five holdings are Tractor Supply Co. (NASDAQ:TSCO) 2.9%, Live Nation Entertainment Inc. (NYSE:LYV) 2.9%, Carter’s Inc. (NYSE:CRI) 2.5%, Deckers Outdoor Corp. (NASDAQ:DECK) 2.4%, and Polaris Industries Inc. (NYSE:PII) 2.3%.
PowerShares S&P SmallCap Consumer Staples Portfolio (XLPS) (overview) (holdings) currently has just 20 holdings and represents only 3.1% of the S&P SmallCap 600 Index. The top five holdings are Casey’s General Stores Inc. (NASDAQ:CASY) 11.8%, TreeHouse Foods Inc. (NYSE:THS) 11.0%, United Natural Foods Inc. (NASDAQ:UNFI) 9.3%, Sanderson Farms Inc. (NASDAQ:SAFM) 7.6%, and Diamond Foods Inc. (NASDAQ:DMND) 5.7%.
PowerShares S&P SmallCap Energy Portfolio (XLES) (overview) (holdings) currently has 23 holdings and represents 5.2% of the S&P SmallCap 600 Index. The top five holdings are St. Mary Land & Exploration Co. (NYSE:SM) 10.3%, Oil States International Inc. (NYSE:OIS) 10.0%, Dril-Quip Inc. (NYSE:DRQ) 8.6%, SEACOR Holdings Inc. (NYSE:CKH) 8.1%, and World Fuel Services Corp. (NYSE:INT) 7.3%.
PowerShares S&P SmallCap Financials Portfolio (NYSEARCA:XLFS) (overview) (holdings) currently has 99 holdings and represents 18.2% of the S&P SmallCap 600 Index. The top five holdings are National Retail Properties Inc. (NYSE:NNN) 2.4%, ProAssurance Corp. (NYSE:PRA) 2.3%, Entertainment Properties Trust (NYSE:EPR) 2.2%, Tanger Factory Outlet Centers Inc. (NYSE:SKT) 2.2%, and BioMed Realty Trust Inc. (NYSE:BMR) 2.1%.
PowerShares S&P SmallCap Health Care Portfolio (XLVS) (overview) (holdings) currently has 79 holdings and represents 13.4% of the S&P SmallCap 600 Index. The top five holdings are Mednax Inc. (NYSE:MD) 4.6%, Salix Pharmaceuticals Ltd. (NASDAQ:SLXP) 3.6%, AMERIGROUP Corp. (AGP) 2.9%, Cooper Cos. (NYSE:COO) 2.9%, and Regeneron Pharmaceuticals Inc. (NASDAQ:REGN) 2.9%.
PowerShares S&P SmallCap Industrials Portfolio (XLIS) (overview) (holdings) currently has 95 holdings and represents 16.9% of the S&P SmallCap 600 Index. The top five holdings are Gardner Denver Inc. (NYSE:GDI) 3.2%, Acuity Brands Inc. (NYSE:AYI) 2.7%, Watsco Inc. (NYSE:WSO) 2.5%, CLARCOR Inc. (NYSE:CLC) 2.4%, and Toro Co. (NYSE:TTC) 2.3%.
PowerShares S&P SmallCap Information Technology Portfolio (XLKS) (overview) (holdings) currently has 121 holdings and represents 18.0% of the S&P SmallCap 600 Index. The top five holdings are Skyworks Solutions Inc. (NASDAQ:SWKS) 3.5%, Varian Semiconductor Equipment Associates Inc. (NASDAQ:VSEA) 3.1%, Cypress Semiconductor Corp. (NASDAQ:CY) 2.4%, Veeco Instruments Inc. (NASDAQ:VECO) 2.4%, and Concur Technologies Inc. (NASDAQ:CNQR) 2.3%. Note: the telecom sector is not included in XLKS like it is for SPDR Select Sector Technology (NYSEARCA:XLK). Instead, the telecom stocks are included in the Utilities fund (XLUS).
PowerShares S&P SmallCap Materials Portfolio (XLBS) (overview) (holdings) currently has 30 holdings and represents 4.6% of the S&P SmallCap 600 Index. The top five holdings are Rock-Tenn Co. Class A (RKT) 8.9%, NewMarket Corp. (NYSE:NEU) 6.1%, Eagle Materials Inc. (NYSE:EXP) 5.7%, H.B. Fuller Co. (NYSE:FUL) 5.6%, and OM Group Inc. (NYSE:OMG) 5.3%.
PowerShares S&P SmallCap Utilities Portfolio (XLUS) (overview) (holdings) currently has 14 utilities stocks and six telecommunications stocks for a total of 20 holdings. Sector weightings within the S&P SmallCap 600 Index are 3.4% for utilities and 0.6% for telecommunications. Therefore, XLUS is about 81% utilities and 19% telecom. The top five holdings are all utilities: Piedmont Natural Gas Co. (NYSE:PNY) 11.6%, New Jersey Resources Corp. (NYSE:NJR) 9.1%, Southwest Gas Corp. (NYSE:SWX) 8.0%, South Jersey Industries Inc. (NYSE:SJI) 7.3%, and Northwest Natural Gas Co. (NYSE:NWN) 7.1%.
Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned.