We have seen fairly steady action in the December 20 calls in the largest Financial Equity based ETF, the Financial Select Sector SPDR Fund (NYSE:XLF), in recent sessions, along with trailing one month inflows of north of $500 million.
The XLF (Expense Ratio 0.15%) has traded as high as $19.88 on an intraday basis in early September, and as high as $19.81 on an intraday basis in early October before falling back to present levels around $19.48. The fund has an asset base of $12.3 billion currently, and is about 4 times larger than the next biggest ETF in the segment, which is VFH (Vanguard Financials, Expense Ratio 0.12%, $3.2 billion in AUM). Interestingly, the three times daily levered trading vehicle FAS (Direxion Daily Financial Bull 3X Shares, Expense Ratio 0.95%) has crept up the ranks in terms of the largest ETFs in this segment as well, as it is presently the sixth largest fund in the space with about $1.02 billion in assets under management.
The ProShares leveraged Bull competitor UYG (ProShares Ultra Financials, Expense Ratio 0.95%) is significantly smaller than FAS at $647 million in assets under management, and both funds have seen mild outflows year-to-date. Along with FAS, its sister ETF on the “Bear” side is the popular trader vehicle FAZ (Direxion Daily Financial Bear 3X, Expense Ratio 0.95%) and this fund has about $327 million in AUM presently.
Top holdings in XLF are presently: 1) BRK.B (11.44%), 2) JPM (10.03%), 3) WFC (8.39%), 4) BAC (6.66%) and 5) C (5.72%), with WFC notably being in the news constantly recently amid turmoil there and the departure of the company’s CEO.
Interestingly, WFC stock itself is down about 13% from its peak in early September to current levels, while XLF itself is only down roughly 2% during the same time period. This is a good short-term demonstration of the positive effects of diversification within a portfolio, when one specific name in said portfolio has unanticipated bad news that negatively and suddenly hits the stock, as strength in other parts of XLF have helped stem the bloodletting for holders of the ETF in the past month or so.
XLF shares rose $0.16 (+0.80%) to $19.49 in Tuesday afternoon trading.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.