Williamstown, MA, August 31, 2008 --(PR.com
)-- The latest edition of Fidelity Independent Adviser’s PowerShares Momentum Tracker (http://www.fidelityadviser.com/readMe_PS.asp) analyzes PowerShares Dynamic Financials (PFI)—a financial ETF that has held up astonishingly well when compared to its peers.
While financial ETFs have suffered the same pull back as their financial components, some have faired better than others in the onslaught of bad news. “Among the ETFs covered by PowerShares Momentum Tracker (http://www.fidelityadviser.com/readMe_PS.asp), PowerShares Dynamic Financials (PFI) has led the pack, showing remarkable resilience in a difficult environment,” noted publisher Don Dion. Since July 17, PFI has jumped 10 spots on the Sector Momentum Table, moving from the 48th to 38th position. According to Morningstar, PFI’s three-month return has also outperformed the market, besting the S&P 500 by 3.02%.
PFI tracks the Dynamic Financial Intellidex Index, which selects components based on a wide range of criteria from fundamental growth and stock valuation to investments and risk factors. PFI’s methodology seeks to select securities with the greatest capital appreciation potential for incorporation into the index. “These criteria are fairly standard fare for a broad index,” said Dion, “but factors such as weighting, market cap and style allocations have helped PFI to weather the financial storm.”
PFI’s formula has placed the overwhelming majority of included equities under the classification of “value.” Rather than concentrating allocation into solely large-cap financials, PFI diversifies evenly across the sector, with 26.42% in large-cap value, 26.35% in mid-cap value and 29.70% in small-cap value—a feature that emphasizes a “best of breed” strategy. “This allocation has undoubtedly lessened the blow from the largest financials in recent months,” said Dion, “cushioning PFI from the brunt of the market downturn while other large-cap value financial ETFs—such as iShares’ Dow Finance (IYF)—have sustained greater losses.” As of August 21, PFI was down only 11.78% year to date while IYF had fallen more than 25% in the same period.
Another attribute of PFI that has helped to cut market risk is a low concentration in the fund’s top holdings. While PFI does not contain a particularly large number of stocks—60 in total—the fund’s allocation is spread fairly evenly throughout the index. PFI’s top holding, TD Ameritrade
, constitutes only 2.91% of the index—the top 10 holdings compose only 25.38% of the fund as of August 25. When you compare this to IYF’s 36.26% concentration in its top components, PFI’s composition may offer a safer alternative for investors looking for a more conservative allocation.
Do PFI’s unique attributes make it safe for investment? Dion believes that “as uncertainty within the financial sector continues to rise, PFI’s relative performance may not assuage investors who believe that the worst is yet to come.” Dion believes that potential investors should have a knowledge of financial equities, and perhaps a strong stomach— “for those who are brave enough to tiptoe into the conservative end of the financial tide pool, however, PFI’s fundamental methodology and returns may help this ETF to stand out from a hard-hit sector.” http://fidelityadviser.com/
PowerShares Momentum Tracker is a member of Fidelity Independent Adviser’s family of financial publications. With more than 70,000 subscribers in the United States and 29 other countries, Fidelity Independent Adviser publishes four monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers. http://store.fidelityadviser.com/pws1yr.html
Don Dion, publisher of Fidelity Independent Adviser, is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts, Dion Money Management manages more than $750 million in assets for clients in 49 states and 11 countries. A licensed attorney in Massachusetts and Maine, Mr. Dion has more than 25 years’ experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management. http://www.dionmm.com/