Weird ETFs To Buy #1 — The Guggenheim Spin-Off ETF
Firms spin off various divisions for a multitude of reasons. Unrelated businesses have a better chance of being appreciated by the market, while troubled departments can be let go in order for a good division to shine. Whatever the case, these spinoffs can quite lucrative for investors. According to a study by Purdue University, spun-off subsidiaries have outperformed their parent companies by more than 20% on average during the first three years.
While investors can directly bet on these spin-offs, an easier way is through Guggenheim Spin-Off ETF (CSD). The $725 million fund tracks 34 different companies that have been spun-off from their parents within the past 30 months. Top holdings include refiner Phillips 66 (PSX) and organic foods producer WhiteWave Foods (WWAV). All in all, consumer names makeup the bulk of the fund, followed by industrials and energy stocks. CSD has decidedly mid-cap tilt as well.
That focus on spun-off companies has suited investors in CSD well since its inception in 2006. Since then, CSD has managed to produce a 9.3% annual return — besting the venerable S&P 500.
Expenses for CSD run at 0.65% — or $65 per $10,000 invested.