Gain Exposure to Small-, Mid- and Large-Cap Banks

(Note: third in a series on post-pandemic boom ETFs)

The SPDR S&P Bank ETF (NYSEARCA: KBE) tracks an equal-weighted index of U.S. banking firms of various sizes.

The exchange-traded fund (ETF) tracks the S&P Banks Select Industry Index. It seeks to provide exposure to the bank segment of the S&P TMI, which is comprised of the following sub-industries: asset management & custody banks, diversified banks, regional banks, other diversified financial services and thrifts & mortgage finance sub-industries.

KBE is designed to track a modified equal-weighted index which provides the potential for unconcentrated industry exposure across large-, mid- and small-cap stocks. It allows investors to take strategic or tactical positions at a more targeted level than traditional sector-based investing.

Heavily weighted in banks at 87.74%, the fund also has a significant stake, 5.6%, in property & casualty insurance, and 4.95% in investment management & fund operators. KBE’s top five holdings include SVB Financial Group (NASDAQ: SIVB), 1.99%; MGIC Investment Corporation (NYSE: MTG), 1.72%; First Republic Bank (NYSE: FRC), 1.71%; Bank of America Corp. (NYSE: BAC), 1.71%; and Voya Financial, Inc. (NYSE: VOYA), 1.69%.

Chart Courtesy of StockCharts.com

The fund’s share price currently trades around $41.50. It has $1.2 billion in assets under management, 86 holdings and an impressive 3.16% dividend yield. It has an average spread of 0.3% and an expense ratio of 0.35%, meaning it is relatively inexpensive to hold in relation to other exchange-traded funds.

To sum up, the popular ETF tracks an equal-weighted index of U.S. banking stocks. Equal weighting puts big-name banks on equal footing with smaller ones and increases the emphasis on smaller firms on the whole. KBE fills a niche by providing exposure to a broad selection of banks in an equal-weighted wrapper. Overall, costs are low, too. KBE is tremendously liquid, charges a competitive fee and tracks its index well. However, I urge any interested investors to exercise their own due diligence in deciding whether this fund fits their individual portfolio goals.

Remember, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.