Our forward-looking ETF and mutual fund ratings provide diligence on ETFs and mutual funds that is rarely found on individual stocks. Through this work, we can discern which ETFs and mutual funds are the best in breed.

We’ve been bullish on certain Financials stocks for quite some time and this week’s Long Idea is a Very Attractive-rated ETF that ranks as one the Best Sector ETFs in 4Q26 and improves upon a sector that already earns an Attractive rating.

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This ETF Provides Better Risk/Reward Than the Market

This ETF tracks a subset of the Financials sector and holds highly profitable and attractively valued companies.

Figure 2 in the full report shows our detailed rating for the ETF, which includes each of the criteria we use to rate all ETFs and mutual funds under coverage. These criteria are the same for our Stock Ratings because the performance of an ETF’s holdings drives the performance of the ETF after fees. Figure 2 also compares the ETF’s rating with those of IWD, SPY, and IWM.

This ETF’s holdings are superior or equal to SPY in four of the five criteria that make up our Portfolio Management Rating. Specifically:

  • The ETF’s holdings earn an Attractive Economic vs. Reported EPS rating, the same as SPY.
  • The ETF’s ROIC is 9%, which is lower than SPY’s at 26%.
  • The ETF’s 2-yr avg FCF yield of 4% is higher than SPY’s at 0%.
  • The PEBV ratio for the ETF’s holdings is 1.0, which is much lower (better) than SPY’s at 4.5.
  • Our discounted cash flow analysis reveals an average market-implied GAP of just two years for the ETF’s holdings compared to 51 years for SPY.

The takeaway?

This ETF allocates to profitable businesses, as measured by rising economic earnings and a 9% ROIC, which trade at much cheaper prices than the stocks in the S&P 500.

This ETF Is Better than the Overall Financials Sector, Too

Our analysis reveals that this ETF allocates more capital to profitable companies with cheaper valuations than State Street Financial Select Sector SPDR ETF (XLF), even as XLF also earns a Very Attractive rating.

Per Figure 3, the ETF allocates 47% of its assets to Attractive-or-better rated stocks compared to 27% for XLF.

The ETF allocates 96% of its assets to Neutral-or-better rated stocks compared to 78% for XLF. It allocates just 2% of its assets to Unattractive-or-worse rated stocks compared to 20% for XLF.

Figure 3: This ETF’s Holdings Are Superior to XLF

Sources: New Constructs, LLC and company filings

…there’s much more in the full report. You can buy the report a la carte here.

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