Focusin’ On a Yield-Centered Russell 1000 Fund

If you’ve been a reader of The Deep Woods for any length of time, you know about my ethos: focus, integration and celebration — and that I devote myself to those values in every sphere of my life, including investing. Thus, I am always interested in exchange-traded funds (ETFs) that are as devoted to their slice of the investing universe as I am.

Specifically, the SPDR Russell 1000 Yield Focus ETF (NYSEARCA: ONEY) is an ETF that, like its siblings SPDR Russell 1000 Low Volatility Focus ETF (NYSEARCA: ONEV) and SPDR Russell 1000 Momentum Focus ETF (NYSEARCA: ONEO), is devoted to sorting, selecting and weighting the large-cap stocks in the Russell 1000 Index by three “core” characteristics (value, quality and small size) and a “focus” factor — yield — scaled by market capitalization, of course. Then, companies whose weights do not make the cut are removed from the index.

As a result of this, ONEY’s portfolio looks like the wider market, but with a slant towards the core and focus criteria used by the fund’s managers and towards mid-cap companies.

While some may question the wisdom of relying on the Russell 1000, as the index has declined by 6% since late July, that decline has largely been caused by rising bond yields. While this, in turn, will likely remain true due to the Fed’s recent “higher-for-longer” stance regarding interest rates, this is not the case for all stocks in the index. Some, especially those linked to the AI revolution, are doing quite well. In addition, while the dawn of interest rate cuts has been pushed back, it will come in time. This will cause bond yields to fall and growth stocks to, hopefully, resume their upward trajectory.

Top holdings in this portfolio include Pioneer Natural Resources Company (NYSE: PXD), Devon Energy Corporation (NYSE: DVN), Dow Inc. (NYSE: DOW), Valero Energy Corporation (NYSE: VLO), Diamondback Energy, Inc. (NASDAQ: FANG), 3M Company (NYSE: MMM) and LyondellBasell Industries NV (NYSE: LYB).

This fund is down 3.47% over the past month, down 1.38% over the past three months and down 0.65% year to date. The fund has $735.62 million in assets under management, and it has an expense ratio of 0.20%.

Chart courtesy of StockCharts.com.

While this fund does provide an access point into the world of dividend-yielding mid-cap stocks, such an ETF may not be suitable for all investors. Investors should always do their due diligence before adding any stock, ETF or fund to their portfolio to make sure it is the best choice for his or her investing strategy.

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