IWL iShares Russell Top 200

While concerns over Syria have eased, the broader markets were nevertheless worried about taper talks from the Fed. Finally, the Federal Reserve surprised investors by not tapering the stimulus program, as they were expecting a slash of $10 billion (read: No Taper? No Problem for These Dividend ETFs).
 
With the uncertainty looming in the markets, many investors shifted focus to small cap securities, which have had a decent performance so far this year. However, the good news is that large caps are poised to become strong performers in the remainder of the year, especially if volatility picks up thanks to D.C. dysfunction.
 
This is mainly due to stellar performances of a few big players in the market. Sectors like Automobile and Pharmaceuticals have been the road runners this year and with the Q3 earnings hitting soon the funds in the large cap space are poised to perform better (read: 3 ETF Winners from the 'No Taper' Shocker).
 
Such an environment suggests earnings will be a big focus and the well-performing companies on this front will be the main drivers going forward. On the contrary, those who miss earnings will be left in the lurch for the ones with earnings beat and rosier outlooks after this recent market surge.
 
Against this backdrop, a focus on large caps in Q3 earnings could be ideal, and this can easily be done by looking at the Zacks ETF Rank.
 
About the Zacks ETF Rank
 
The Zacks ETF Rank provides a recommendation for the ETF in the context of our outlook for the underlying industry, sector, and style box or asset class (read: Zacks ETF Rank Guide). Our proprietary methodology also takes into account the risk preferences of investors. ETFs are ranked on a scale of 1 (Strong Buy) to 5 (Strong Sell) while they also receive one of three risk ratings ─ namely Low, Medium or High.
 
The aim of our models is to select the best ETFs within each risk category. We assign each ETF one of the five ranks within each risk bucket. Thus, the Zacks ETF Rank reflects the expected return of an ETF relative to other products with a similar level of risk.
 
For investors seeking to apply this methodology to their portfolio in the large-cap investing sector, we have taken a closer look at the top ranked iShares Russell Top 200 ETF (IWL). This ETF has a Zacks ETF Rank of 1 or ‘Strong Buy’ and is detailed below.
 
About IWL
 
Launched in September 2009, IWL tracks the Russell Top 200 Index which is a float adjusted, capitalization weighted index and measures the performance of the largest capitalization sector of the U.S. equity market.

The index taps the returns from the top 200 companies listed in the Russell 3000 Index, representing about 65% of the market-cap of all the publicly traded U.S. equity securities. So far IWL has amassed $68.2 million in assets (Read: Financial ETFs Tumble on Citigroup Warning).
 
From an individual holdings perspective, IWL holds about 196 large-cap securities in its basket. The fund is well diversified as its top 10 holdings take up a share of only 22.35%. Apple Inc., Exxon Mobil, Microsoft Corp., Johnson & Johnson, General Electric, Google Inc., and Procter & Gamble are some of its top holdings.
 
Sector-wise, the product gives nice exposure to various sectors but is a bit tilted towards Financials with about 18% share. Others sector holdings include Technology (16.69%), Consumer Discretionary (13.36%), Healthcare (13.35%), Energy (11.17%), and Producer Durables (10.61%). Consumer Staples, Utilities and Materials complete the list, but don’t account for much in this fund.
 
IWL uses a blend style approach and charges investors only 15bps in fees and expenses. The ETF is not a popular choice among investors in the large cap space as is evident from its low average daily trading volume of only 8,500 shares a day (see all the Large Cap ETFs here).
 
The product has performed pretty well against most of its counterparts by giving a year-to-date return of about 14.4%. In fact, IWL is hovering above its 200-Day moving average of $38.19. The product has a strong correlation with the S&P 500 and it has a Beta of 0.99. Moreover, it gives an impressive dividend yield of 3.09% yearly.
 
Bottom Line
 
Speculation about the taper and Washington D.C.’s plans has had an adverse impact on a few key market segments. At a time when investors are a little confused as to how to benefit from the broader markets and especially the large cap stocks, IWL may be an alluring option.
 
This ETF has been overlooked by investors in the large cap space though it has delivered sturdy returns over the long term. While volume and AUM aren’t that great, the fund is relatively cheap on average when compared to other choices in the space. The product has had a good performance record since its inception (find all Top Ranked ETFs here).
 
So, investors looking for the large cap ETF should consider IWL for their exposure, as it is a top rated ETF that is poised to lead the way higher in the coming months, especially if the focus returns to large cap stocks.
 
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