The Trader column in Barron's had a couple of fun facts about the sector SPDRs that might be worth exploring.
First, here is the weight of each of the sectors in the S+P 500
Financials 20.97%
Technology 15.51%
Healthcare 13.19%
Industrial 11.20%
Discretionary 10.29%
Energy 9.69%
Staples 9.30%
Utilities 3.32%
Telecom 3.29%
Materials 3.00%
Now, the dollars and percentage of sector SPDRs. For some reason tech and telecom are combined in the XLK.
Financials XLF $1.83 billion 13%
Tech & Telecom XLK $1.70 billion 12%
Healthcare XLV $1.76 billion 12.5%
Industrials XLI $850 million 6%
Discretionary XLY $477 million 3.3%
Energy XLE $ 3.43 billion 24%
Staples XLP $905 million 6.4%
Utilities XLU $2.3 billion 16%
Materials XLB $ 801 million 5.6%
The total dollars of all of them (the dollar amounts are from Yahoo finance) is $14.053 billion. The numbers here are different than what was in the Barron's article, I wouldn't be surprised if the Yahoo data is not the most current available but the overweights are close enough to make the point.
Energy and utilities are extremely over-owned. Financials and the two consumer groups standout as being under-owned. Over-owned can become more over-owned and under-owned can become more under-owned. Another flaw in the numbers would be that investors have other choices for sector ETFs and a given investor may use an ETF for financials and a common stock for tech.
The thing I focus on is the general trend of what has been captured in the numbers. For 2005 I was a big fan of utilities but at the end of last year I noted that utilities might have a tough time with another great year. Sometimes money rotates from sector to sector when the catalyst is shorter term in nature. This is one of the reasons why I thought telecom might do well in 2006, previously out of favor and no super catalyst.
Energy does have a super catalyst, in my opinion, which leads me to think that energy could become much more over-owned than it is now. Most importantly, this stresses the need to be in touch with sector weights and sentiment. Tech became 30% of the S+P 500 and that was a big part of the problem. 30% is too much. The current weight of energy at 24% in the sector SPDRs is different than 24% of the index but it is a big number nonetheless.
Proud Member Of
Random Roger
© 2009 | Gadget Theme Blogger Template
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
Original WPtheme By Blogger Template | Converted By Gadget Lover
| Distributed by eFree Blogger Help
4 comments:
Energy used to be a much higher weight in the S&P 500 than it is now. Energy can get way more overbought and not get to the weight it had twenty five years ago.
Fred
I would suggest the ETF amounts is less a representation of sector ownership and more a representation of investors' willingness to select individual stocks. Tech, discretionary, staples, and financials all are comprised of companies that provide products people use in their daily lives and give people the perception that they know these companies. Other than their local utility, how many people know many utility stocks? Even better how many people understand them? Long and short of it is that I would not read too much into the weights of etf's relative to the benchmark particularly when it is such a relatively small dollar amount.
Fred, energy was close to 30% of the SPX in 1981.
to the second comment, your conclusion might be correct, of course, but I'm nt sure buying a utility is difficult relative to stock picking.
Roger, am I understanding the ETF vs S&P correctly - ie the ETF are the current overall positions of investors in the iShares, vs the overall market weighting of the S&P500?
Yes??
JW
Post a Comment