9 ETFs Earn High Scores

2/15/2010


Any exchange-traded fund (ETF) we recommend should have the same attributes we seek in our stock picks — high Quadrix® scores. We use Quadrix to evaluate fund portfolios based on their individual stock holdings. Quadrix’s predictive qualities provide a measure of confidence when evaluating an ETF’s total-return potential.
The table below lists nine ETFs with solid Quadrix underpinnings and strong relative returns. Common traits include:

Solid and improving scores for Quadrix Overall and Value — the two most effective scores in our stock-rating system. All nine funds earn weighted-average Overall scores of at least 70 and Value scores above 50, with improvement in both scores over the past three months. Weighted averages are computed using Quadrix scores for each stock in a portfolio, weighting the scores based on the percentage of fund assets in each stock.

Improved Quadrix exposure. Since October, all nine ETFs have seen an increase in the percentage of assets in stocks with Overall scores above 90, as well as above 80. All nine funds have fewer assets in stocks with Overall scores below 20 than they did three months ago.

Strong performance. All nine ETFs have outperformed their peer group based on 12-month total return.

QUADRIX STANDOUTS
Average Quadrix
–— Score * —–
Quadrix Overall
—— (% of Assets) ——
ETF (Price; Ticker)
Overall
Value
Above
90
(%)
Above
80
(%)
Below
20
(%)
Exp.
Ratio
(%)
12-Mo.
Total
Return
(%)
iShares FTSE KLD 400
Social ($41; DSI)
74
65
24
47
3
0.50
31.1
PowerShares Active
AlphaQ ($22; PQY)
82
58
45
67
0
0.75
37.8
PowerShares Buyback
Achiev. ($20; PKW)
71
69
25
42
1
0.60
28.9
PowerShares QQQ
($43; QQQQ)
80
58
50
60
3
0.20
37.6
Rydex S&P MidCap 400
Pure Gro. ($56; RFG)
72
53
22
45
3
0.35
48.6
Rydex S&P Sm. Cap
600 Pure Gro. ($35; RZG)
71
55
24
43
4
0.35
40.0
WisdomTree MidCap
Earnings ($42; EZM)
72
70
19
40
0
0.38
44.5
WisdomTree SmallCap
Earnings ($39; EES)
72
73
21
42
1
0.38
54.5
WisdomTree Total
Earnings ($38; EXT)
74
71
21
45
0
0.28
29.7
* Quadrix scores are percentile ranks, with 100 the best.

iShares FTSE 400 Social Index Fund ($41; DSI) invests in 400 companies with strong social, environmental, and corporate-governance records. The underlying index originated in 1990 and was first constructed using socially responsible factors. The fund, with a weighted-average Overall score of 74, is typically 90% invested in large-company stocks, with most of the rest in midcaps. The fund’s largest position is a 5% stake in Microsoft ($28; MSFT), and 30% of assets are in 10 stocks.


Rydex S&P MidCap 400 Pure Growth ($56; RFG) and Rydex S&P SmallCap 600 Pure Growth ($35; RZG) track S&P style indexes that weight stocks using three factors — three-year sales and earnings growth and 12-month share-price momentum. The midcap fund has 98 holdings and is nearly 27% invested in consumer discretionary stocks. The small-cap fund has 149 stocks and a 29% weighting in technology.


Unlike ETFs that track traditional market-capitalization-weighted indexes, the three WisdomTree offerings listed above mimic indexes that weight stocks based on earnings. Companies with greater earnings generally have larger weightings in the ETFs. WisdomTree Total Earnings ($38; EXT) contains nearly 1,100 stocks, with Exxon Mobil ($65; XOM) the largest position at 3.7% of assets. The fund earns a weighted-average Overall score of 74, and 45% of assets are in stocks with Overall scores above 80.

 

FORECASTS FUND RECOMMENDATIONS
Through Feb. 9, our recommended Growth Portfolio has dipped 3.5% this year, versus a decline of 4.4% for its benchmark portfolio and a loss of 3.8% for the S&P 500 Index. The Conservative Portfolio fell 2.5%, versus a decline of 3.1% for its benchmark.
— Year-to-Date —
–— % of Portfolio –—
Fund (Price; Ticker)
Return
(%)
Rank
Conser-
vative
(%)
Growth
(%)
American Century Heritage
($15; TWHIX)
(4.4)
C
7
8
Dreyfus Small Cap Stock Index
($16; DISSX)
(4.9)
D
0
0
Fidelity Export & Multinational
($19; FEXPX)
(4.9)
C
7
8
Fidelity Leveraged Co. Stock
($22; FLVCX)
(3.2)
C
0
0
Heartland Select Value ($24; HRSVX)
(3.2)
D
6
7
Heartland Value Plus ($23; HRVIX)
(2.5)
B
7
7
T. Rowe Price Int’l Discovery
($36; PRIDX)
(3.7)
A
5
5
T. Rowe Price New Horizons
($25; PRNHX)
(3.4)
A
7
8
Vanguard 500 Index ($99; VFINX)
(3.8)
C
5
5
Vanguard Dividend Growth
($13; VDIGX)
(3.5)
B
8
10
Vanguard Emerging Mkts. Stock
Indx. ($24; VEIEX)
(7.6)
C
0
5
Vanguard GNMA ($11; VFIIX)
1.5
C
5
0
Vanguard Inter.-Term Tax Exempt
($14; VWITX)
1.1
C
0
0
Vanguard International Value
($29; VTRIX)
(6.8)
D
7
5
Vanguard Short-Term Invest. Grade
($11; VFSTX)
1.3
A
0
0
Vanguard Total Bond Mkt. Index
($10; VBMFX)
1.5
C
20
0
Vanguard Total Int’l Stock Index
($13; VGTSX)
(6.6)
C
5
5
Vanguard Wellesley Income
($20; VWINX)
(0.7)
B
0
10
Vanguard Wellington ($28; VWELX)
(2.4)
C
5
10
Wells Fargo Advantage High Income
($7; STHYX)
(0.3)
D
6
7
* Rankings through Feb. 9from Morningstar, comparing performance among funds with same objectives. A = top 20%; B = next 20%; C= middle 20%; D = next 20%; E = bottom 20%. c Closed to new investors.

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