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Is iShares MSCI USA Equal Weighted ETF (EUSA) a Strong ETF Right Now?

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The iShares MSCI USA Equal Weighted ETF (EUSA - Free Report) made its debut on 05/05/2010, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - All Cap Blend category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.

There are some investors, though, who think it's possible to beat the market with great stock selection; this group likely invests in another class of funds known as smart beta, which track non-cap weighted strategies.

By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.

Methodologies like equal-weighting, one of the simplest options out there, fundamental weighting, and volatility/momentum based weighting are all choices offered to investors in this space, but not all of them can deliver superior returns.

Fund Sponsor & Index

EUSA is managed by Blackrock, and this fund has amassed over $243.76 million, which makes it one of the larger ETFs in the Style Box - All Cap Blend. Before fees and expenses, EUSA seeks to match the performance of the MSCI USA Equal Weighted Index.

The MSCI USA Equal Weighted Index represents the MSCI USA Index, measures the performance of equity securities in the top 85% by market capitalization of equity securities listed on stock exchanges in the United States.

Cost & Other Expenses

Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.

Annual operating expenses for this ETF are 0.15%, making it one of the cheaper products in the space.

It has a 12-month trailing dividend yield of 2.34%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Representing 16.80% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Financials and Industrials round out the top three.

Taking into account individual holdings, Regeneron Pharmaceuticals Inc (REGN - Free Report) accounts for about 0.30% of the fund's total assets, followed by Cabot Oil & Gas Corp and Clorox (CLX - Free Report) .

Its top 10 holdings account for approximately 2.78% of EUSA's total assets under management.

Performance and Risk

So far this year, EUSA has lost about -26.92%, and is down about -16.17% in the last one year (as of 03/30/2020). During this past 52-week period, the fund has traded between $40.33 and $66.29.

The ETF has a beta of 1.08 and standard deviation of 19.90% for the trailing three-year period, making it a medium risk choice in the space. With about 641 holdings, it effectively diversifies company-specific risk.

Alternatives

IShares MSCI USA Equal Weighted ETF is a reasonable option for investors seeking to outperform the Style Box - All Cap Blend segment of the market. However, there are other ETFs in the space which investors could consider.

IShares Core S&P Total U.S. Stock Market ETF (ITOT - Free Report) tracks S&P Total Market Index and the Vanguard Total Stock Market ETF (VTI - Free Report) tracks CRSP US Total Market Index. IShares Core S&P Total U.S. Stock Market ETF has $21 billion in assets, Vanguard Total Stock Market ETF has $111.17 billion. ITOT has an expense ratio of 0.03% and VTI charges 0.03%.

Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - All Cap Blend.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.

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