Back to top

ETF News And Commentary

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Leading up to the Q3 earnings season, investors were quite uncertain about the direction of American stocks to close out the year. A great deal of worry is certainly baked into the market thanks to a number of political risks regarding the election and the fiscal cliff, while international market weakness sure isn’t helping matters either.

These worries have been confirmed by some degree of weakness to start the new earnings season as a number of companies have seen weakness in their reports. Thanks to this, the average U.S. focused equity ETF, according to XTF.com, has lost about 2.8% in the trailing one month period, underscoring the negative tone many investors are taking towards the market at this time (read Beware These Three Volatile Financial ETFs).

However, while most segments, and indeed broad market ETFs, are facing a wall of worry, there are still a few standout sectors. Particularly, investors have seen some strength in the financial space as a number of large firms in this corner of the market have posted solid earnings despite the overall market gloom.

Given this strong performance of financials as of late, it could be time to cycle into the space for protection during this difficult time. While a broad look at the sector could be a good idea, a concentrated look at one of the more outperforming segments of the space, insurance companies, could be the best way to go. 

In fact, the insurance ETF space has been one of the best performers in the U.S.-centric fund market, crushing many of their competitors in the trailing one month period. According to XTF.com as of October 23rd, of the top seven best performing U.S. ETFs in the trailing one month period, five are insurance ETFs, suggesting that they have been able to, on average, crush broad market performance in this recent market downturn (see Top Three Mortgage Finance ETFs).

With this strength acting as a nice momentum tailwind, and with more uncertainty likely coming down the pike in the near future, insurance ETFs could be the way to go for investors looking to play the American market with ETFs. For these investors, we have briefly highlighted some of the top performing choices in this intriguing slice of the market below:

SPDR S&P Insurance ETF (KIE - ETF report) – This ETF utilizes an equal weight methodology in its strategy, holding 46 securities in its basket and charging a reasonable 35 basis points a year in fees. In terms of yield, the product pays out 1.7% in 30 Day SEC terms, and it receives a Zacks ETF Rank of ‘3’ or hold, with a medium risk rating (read Does Your Portfolio Need a Financial ETF?).

In terms of holdings, the sector profile is skewed towards property and casualty insurance at 40% of assets, while life & health account for another 20% of the fund. Due to the equal weight methodology, the no one security accounts for more than 2.7% of assets, giving the product a very spread out approach for its exposure to the insurance sector.

PowerShares Dynamic Insurance Portfolio – Another way to target the insurance industry is via PIC and its more ‘dynamic’ approach. The fund utilizes a variety of investment criteria in order to weight and select securities for its fund, resulting in an ETF that has just 30 stocks in its basket but a net expense ratio of 0.67% (see Zacks Top Ranked Financial ETF: Star in Q3 Earnings).

Investors should also note that volume and yield come in on the low side, so the product probably won’t be much of an income destination, especially after fees. However, the fund’s dynamic allocation system could help the product cycle into better stocks and keep the ETF at a lower risk level, assisting the fund in achieving a Zacks ETF Rank of 3 or Hold and a low risk rating.

Dow Jones U.S. Insurance Index Fund (IAK - ETF report) – ETF investors looking for iShares’ entrant in the insurance market should look no further than IAK. This ETF tracks the Dow Jones U.S. Select Insurance Index, holding roughly 60 stocks in its basket and charging investors 47 basis points a year in fees.

The ETF is a little more concentrated, putting close to 60% of assets in the top ten securities and just over 50% in property/casualty insurance firms. The yield is moderate at roughly 1.6% a year, while performance has been solid, putting the fund with a Zacks ETF Rank of ‘3’ or hold, with a medium risk rating.

PowerShares KBW Insurance Portfolio (KBWI - ETF report) – For another PowerShares insurance ETF, investors have KBWI, a fund that utilizes KBW’s methodology in order to focus in on the insurance segment. The product only holds 24 stocks in its basket, and is more of a low cost choice, charging investors just 35 basis points a year in fees (read Three Financial ETFs that Avoid Big Bank Stocks).

The ETF also has a decent mid cap holding, while it is relatively well spread out among its top ten, at least considering the small number of securities in the portfolio. The yield is also relatively good at 1.8% in 30 Day SEC terms, helping to give the ETF a Zacks ETF Rank of 3 or Hold and a low risk rating.

PowerShares KBW Property & Casualty Insurance Portfolio (KBWP - ETF report) – PowerShares teams up with KBW once again for this ETF, except the focus of the fund is solely on property and casualty insurance providers. This results in a basket of roughly 24 stocks and a slightly higher expense ratio of 0.37% to investors.

The portfolio is also heavier in small cap securities, although two large cap names, Travelers (TRV - Analyst Report) and Allstate (ALL - Analyst Report), account for nearly 18% of assets. Investors should also note that the yield is reasonable for this fund at roughly 1.8% in 30 Day SEC terms, while the fund has been one of the best performing of the group in the time frame, adding just over 4.7% for the trailing one month period.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>

Follow @Eric Dutram on Twitter

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%