An Overview of USMV’s Low Volatility Holdings



Indexing approach

The iShares MSCI USA Minimum Volatility ETF (USMV) is an ETF with a portfolio of minimum volatility stocks. It’s based on the MSCI USA Minimum Volatility Index. Smart beta funds generally modify traditional market-based indexes and follow an indexing approach to mimic an index’s performance. Although indexing may eliminate the chance that the fund will substantially outperform the underlying index, it may also reduce some of the risks of active management, such as poor security selection. Indexing seeks to achieve lower costs and better after-tax performance by keeping portfolio turnover lower than that of actively managed investment companies.

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Sector allocation breakdown

The major components of the ETF include the financial, healthcare, and information technology sectors. The financial sector is the largest component of USMV, making up about 24.1% of its total portfolio. USMV currently manages a total portfolio of $6.5 billion distributed over 163 equity holdings.

Moving averages and earnings

McDonald’s (MCD), AT&T (T), Public Storage (PSA), Paychex (PAYX), and AutoZone (AZO) are USMV’s top five holdings. The market fell considerably between November 1 and November 13, 2015. As a result, many of the S&P 500’s major sectors are performing badly.

USMV’s financial sector is trading below its 20-day, 50-day, and 100-day moving averages due to its low earnings. It missed analyst estimates by 1.2% for 3Q15, which is affecting the USMV’s performance in the current quarter.

USMV’s healthcare, information technology, and consumer discretionary sectors are also trading below their 20-day moving averages. We’ll discuss USMV’s possible effects on a portfolio in the next part.


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