Posted on by Micah McDonald

4 Best Financials Sector ETFs to Own Long-Term 1.6

  • Asset Class: Financials Sector

  • Oldest ETF back tested: The Financial Select Sector SPDR® Fund (XLF)

  • Correlation to U.S. Stock Market: 0.82

  • Long-Term Performance: 4.52% CAGR

  • S&P 500 Performance: 6.74% CAGR

  • Back test timeframe: January 1999 – December 2022

  • Number of ETFs available in this asset class: 30

  • Number of ETFs in this asset class that are 10-years old or older: 22

XLF vs SPY: January 1999 – January 2022

XLF vs SPY: December 22, 1998 – January 13, 2023

The Deep Value ETF Accumulator rankings for the 22 oldest Financials sector ETFs:

The 4 top ranked Financials sector ETFs head-to-head comparisons:

KBWP vs FXO vs KIE vs IAI: January 2011 – December 2022
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KBWP vs FXO vs KIE vs IAI: December 2, 2010 – January 13, 2023
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Stated objectives of 4 top ranked Financials sector ETFs:
KBWP– The Invesco KBW Property & Casualty Insurance ETF (Fund) is based on the KBW Nasdaq Property & Casualty Index (Index). The Fund will normally invest at least 90% of its total assets in securities that comprise the Index. The Index is a modified market capitalization weighted index of companies primarily engaged in US property and casualty insurance activities. Keefe, Bruyette & Woods, Inc. and Nasdaq, Inc. compile, maintain and calculate the Index. The Fund and the Index are rebalanced and reconstituted quarterly.
FXO– The First Trust Financials AlphaDEX® Fund is an exchange-traded fund. The investment objective of the Fund is to seek investment results that correspond generally to the price and yield, before fees and expenses, of an equity index called the StrataQuant® Financials Index. Index Description: According to the Index Provider: The StrataQuant® Financials Index is an “enhanced” index developed, maintained and sponsored by ICE Data Indices, LLC or its affiliates (“IDI”) which employs the AlphaDEX® stock selection methodology to select stocks from the Russell 1000® Index. IDI constructs the StrataQuant® Financials Index by ranking the stocks which are members of the Russell 1000® Index on growth factors including three, six and 12-month price appreciation, sales to price and one year sales growth, and, separately, on value factors including book value to price, cash flow to price and return on assets. All stocks are ranked on the sum of ranks for the growth factors and, separately, all stocks are ranked on the sum of ranks for the value factors. Each stock receives either its growth or value score rank as its selection score based on its style designation as determined by Russell. Stocks which Russell allocates between both growth and value receive the better of their growth or value score rank as their selection score. IDI then ranks those stocks contained in the financials sector according to their score. The greater of the top 75% of the eligible universe or 40 stocks is selected for the StrataQuant® Financials Index. If the total count of eligible stocks in the financials sector falls below 40, all eligible stocks will be included. The selected stocks are divided into quintiles based on their rankings and the top ranked quintiles receive a higher weight within the index. The stocks are equally-weighted within each quintile. The index is reconstituted and rebalanced quarterly.
KIE– The SPDR® S&P® Insurance ETF seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the S&P® Insurance Select Industry Index (the “Index”). Seeks to provide exposure to the insurance segment of the S&P TMI, which comprises the following sub-industries: Insurance Brokers, Life & Health Insurance, Multi-Line Insurance, Property & Casualty Insurance, and Reinsurance. Seeks to track a modified equal weighted index which provides the potential for unconcentrated industry exposure across large, mid and small cap stocks. Allows investors to take strategic or tactical positions at a more targeted level than traditional sector based investing. The S&P Insurance Select Industry Index represents the insurance segment of the S&P Total Market Index (“S&P TMI”). The S&P TMI is designed to track the broad U.S. equity market. The insurance segment of the S&P TMI comprises the following sub-industries: Insurance Brokers, Life & Health Insurance, Multi-Line Insurance, Property & Casualty Insurance, and Reinsurance.
IAI– The iShares U.S. Broker-Dealers & Securities Exchanges ETF seeks to track the investment results of an index composed of U.S. equities in the investment services sector. Exposure to U.S. investment banks, discount brokerages, and stock exchanges. Targeted access to domestic investment services stocks. Use to express a sector view. 

 

Why Berkshire Hathaway – BRK.B?

If you looked closely at the rankings chart above, you will note that I slipped Berkshire Hathaway Inc. (BRK.B) in as the #2 rank. And being astute investors, you will also note that BRK.B is not an ETF but is a single company stock. The reason I did this is because I don’t particularly like the Financials sector and have refrained from investing directly into it in the past. But, I do want direct exposure to this sector, so I have come to the conclusion that BRK.B is actually an actively managed mutual fund or hedge fund that also happens to be an individual company stock. Below I will display a few charts to demonstrate why I consider BRK.B an actively managed Financials sector fund:

BRK.B Operating Subsidiaries as of January 15, 2023:

Source: https://www.berkshirehathaway.com//subs/sublinks.html

BRK.B Stock Holdings as of September 30, 2022:

Source: https://www.dataroma.com/m/holdings.php?m=BRK

Past performance of BRK.B:

BRK.B vs SPY: May 9, 1996 – January 13, 2023

BRK.B vs XLF vs SPY: December 22, 1998 – January 13, 2023

BRK.B vs KBWP vs FXO vs KIE vs IAi: December 2, 2010 – January 13, 2023

BRK.B company description: Berkshire Hathaway Inc., through its subsidiaries, engages in the insurance, freight rail transportation, and utility businesses worldwide. It provides property, casualty, life, accident, and health insurance and reinsurance; and operates railroad systems in North America. The company also generates, transmits, stores, and distributes electricity from natural gas, coal, wind, solar, hydroelectric, nuclear, and geothermal sources; operates natural gas distribution and storage facilities, interstate pipelines, liquefied natural gas facilities, and compressor and meter stations; and holds interest in coal mining assets. In addition, the company manufactures boxed chocolates and other confectionery products; specialty chemicals, metal cutting tools, and components for aerospace and power generation applications; flooring products; insulation, roofing, and engineered products; building and engineered components; paints and coatings; and bricks and masonry products, as well as offers manufactured and site-built home construction, and related lending and financial services. Further, it provides recreational vehicles, apparel products, jewelry, and custom picture framing products, as well as alkaline batteries; castings, forgings, fasteners/fastener systems, and aerostructures; and seamless pipes, fittings, downhole casing and tubing, and mill forms. Additionally, the company distributes televisions and information; franchises and services quick service restaurants; distributes electronic components; and offers logistics services, grocery and foodservice distribution services, and professional aviation training and shared aircraft ownership programs. It also retails automobiles; furniture, bedding, and accessories; household appliances, electronics, and computers; jewelry, watches, crystal, china, stemware, flatware, gifts, and collectibles; kitchenware; and motorcycle apparel and equipment. The company was incorporated in 1998 and is headquartered in Omaha, Nebraska.

Source: https://finance.yahoo.com/quote/BRKB.BA/profile/

Thank you for taking time to read this article. If you found it useful, please share it with a friend.

Respectfully yours, Micah McDonald, aka the Deep Value ETF Accumulator

Previous Deep Value ETF Accumulator article on Financials sector ETFs:

4 Best Long-Term Performance Financials Sector ETFs 1.5

Disclosure: We currently own shares of BRK.B and we intend to buy more shares in the future. I am not a professional investment advisor. Please perform your own due diligence or seek the advice of a Registered Investment Advisor before investing in any security mentioned in this article. This website contains affiliate links to M1 Finance and Google AdSense.