Should ALPS Be on Your Investing Radar?

Designed to provide broad exposure to the Large Cap Value segment of the US equity market, the ALPS OUSA is a passively managed exchange traded fund launched on 07/14/2015.

The fund is sponsored by Alps. It has amassed assets over $755.51 million, making it one of the average sized ETFs attempting to match the Large Cap Value segment of the US equity market.

Why Large Cap Value

Companies that fall in the large cap category tend to have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.

While value stocks have lower than average price-to-earnings and price-to-book ratios, they also have lower than average sales and earnings growth rates. Considering long-term performance, value stocks have outperformed growth stocks in almost all markets; however, they are more likely to underperform growth stocks in strong bull markets.

Costs

Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.

Annual operating expenses for this ETF are 0.48%, putting it on par with most peer products in the space.

It has a 12-month trailing dividend yield of 1.68%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector--about 23.60% of the portfolio. Healthcare and Financials round out the top three.

Looking at individual holdings, Microsoft Corp. MSFT accounts for about 5.55% of total assets, followed by Apple Inc. AAPL and JPmorgan Chase & Co. JPM.

The top 10 holdings account for about 40.55% of total assets under management.

Performance and Risk

OUSA seeks to match the performance of the FTSE US Qual / Vol / Yield Factor 5% Capped Index before fees and expenses. The OShares U.S. Quality Dividend Index measures the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in the United States.

The ETF has added roughly 7.72% so far this year and it's up approximately 18.70% in the last one year (as of 05/20/2024). In the past 52-week period, it has traded between $40.56 and $49.41.

The ETF has a beta of 0.88 and standard deviation of 13.78% for the trailing three-year period, making it a medium risk choice in the space. With about 101 holdings, it effectively diversifies company-specific risk.

Alternatives

ALPS holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, OUSA is an outstanding option for investors seeking exposure to the Style Box - Large Cap Value segment of the market. There are other additional ETFs in the space that investors could consider as well.

The iShares Russell 1000 Value ETF IWD and the Vanguard Value ETF VTV track a similar index. While iShares Russell 1000 Value ETF has $56.44 billion in assets, Vanguard Value ETF has $117.23 billion. IWD has an expense ratio of 0.19% and VTV charges 0.04%.

Bottom-Line

While an excellent vehicle for long term investors, passively managed ETFs are a popular choice among institutional and retail investors due to their low costs, transparency, flexibility, and tax efficiency.

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