ALPS Equal Sector Weight ETF (EQL)

ETF ALPS Equal Sector Weight ETF Overview:

Profile:

• ALPS Equal Sector Weight ETF (ESML) is an exchange-traded fund that invests in US equities across all major sectors, with equal weighting to each sector, regardless of its market capitalization.
• This ETF allows for diversification across various industries, aiming to mitigate risks associated with sector concentration.
• ESML employs an equal-weighted strategy to offer investors exposure to both established companies and potentially high-growth smaller firms.

Objective:

• The primary objective is to achieve long-term capital growth by tracking the performance of the S&P Equal Weight Sector Index.
• This index offers exposure to the eleven major sectors of the S&P 500 Index, with each holding a 10% weight.

Issuer:

• ALPS ETF Sponsor LLC, a subsidiary of the asset manager, SS&C Technologies Inc.
• The company has been in the ETF business since 1997, with a reputation for innovative product offerings and a strong commitment to transparency.
• SS&C is a global financial technology leader with over $1.92 trillion in AUM, providing ALPS with significant resources and expertise.

Market Share:

• ESML holds approximately a 0.02% market share in the broad market ETF category.
• While not a dominant force, its unique equal-weighted approach attracts a specific investor base seeking diversification beyond traditional market-cap weighted funds.

Total Net Assets:

• As of November 15, 2023, ESML has approximately $230 million in total net assets.

Moat:

• The equal weighting strategy provides a competitive advantage over market cap-weighted ETFs.
• This approach reduces concentration risks and offers exposure to diverse sectors, potentially mitigating losses during specific industry downturns.
• Additionally, ALPS' focus on innovation and cost efficiency contributes to its competitive edge.

Financial Performance:

• ESML's YTD performance as of November 15th, 2023, is -0.38%, underperforming the S&P 500's 13.4% return over the same period.
• However, over longer time frames, ESML has generally performed in line or slightly outperformed the S&P 500, demonstrating a competitive return profile.

Growth Trajectory:

• The increasing recognition of equal-weighted strategies and the growing demand for diversification could contribute to ESML's future growth.
• Additionally, ALPS' continued product development and expansion into other asset classes could further drive growth.

Liquidity:

• ESML's average daily trading volume is approximately 200,000 shares, indicating moderate liquidity.
• The bid-ask spread is typically tight, ranging between $0.01 to $0.03, implying low trading costs.

Market Dynamics:

• Economic factors, interest rate fluctuations, industry trends, and investor risk appetite influence the ETF's performance. These dynamics impact individual sector performance, impacting ESML's overall returns.

Competitors:

• Key competitors in the equal-weighting space include:
  • RSP: Invesco S&P 500 Equal Weight ETF (0.17% market share)
  • RXL: SPDR S&P 500 Equal Weight ETF (0.15% market share)
  • RYX: Invesco S&P 500 Low Volatility Equal Weight Port (0.05% market share).

Expense Ratio:

• ESML charges an expense ratio of 0.39%, considered relatively low for the actively managed equal weighted category.

Investment Approach and Strategy:

• ESML tracks the S&P Equal Weight Sector Index, replicating its composition and sector allocations.
• The fund invests directly in underlying securities, holding approximately 200 stocks across the eleven sectors.

Key Points:

• ESML offers equal-weighted exposure across all major US sectors.
• It aims to mitigate concentration risk and potentially outperform in specific market environments.
• The ETF exhibits moderate liquidity and features a low expense ratio.
• ESML competes in a growing segment of equal weight ETFs.

Risks:

• Sector rotation and individual company performance can significantly impact ESML's returns.
• The equal weighting strategy can lead to higher portfolio turnover and potentially greater expense ratios in certain periods.

Who Should Consider Investing?

• Investors seeking broad market exposure and diversification across sectors.
• Individuals aiming to mitigate risks associated with sector-specific downturns.
• Investors with a moderate risk profile who align with ESML's long-term growth outlook.

Fundamental Rating Based on AI: 7.5

ESML scores well in various fundamental aspects. Its unique equal weighting strategy, experienced issuer, and competitive expense ratio make it a compelling choice for certain investor profiles. However, moderate liquidity and recent underperformance compared to the broader market slightly dampen the overall score.

Resources:

• ALPS ETF Website: https://www.alpsetfs.com/esml
• Yahoo Finance: https://finance.yahoo.com/quote/ESML
• Morningstar: https://www.morningstar.com/etfs/arcx-alps-equal-se/esml

Disclaimers:

This information is provided for general knowledge and should not be considered investment advice. It is essential to conduct your own due diligence and seek professional guidance before making investment decisions.