PowerShares S&P SmallCap Financials ETF (NASDAQ:PSCF) — Shares of PSCF rose 0.5% on Tuesday, as the FDIC said a key threshold had been surpassed in the federal fund that protects consumers’ U.S. bank deposits. The Wall Street Journal reported this “means relief for many smaller lenders that pay into it,” as they now get to pay less under the 2010 Dodd-Frank Act.
This is good news for the companies that make up the S&P SmallCap 600 Capped Financials Index, which PSCF tracks. They are engaged in financial services and products, including banking, investment services, insurance and real estate finance services.
The top 10 holdings in PSCF are ProAssurance Corporation (NYSE:PRA), Wintrust Financial Corp (NASDAQ:WTFC), Acadia Realty Trust (NYSE:AKR), MB Financial Inc (NASDAQ:MBFI), RLI Corp. (NYSE:RLI), The GEO Group Inc (NYSE:GEO), Home Bancshares Inc (NASDAQ:HOMB), Kite Realty Group Trust (NYSE:KRG), CoreSite Realty Corp (NYSE:COR) and United Bankshares, Inc. (NASDAQ:UBSI).
Morningstar rates PSFC a four-star fund due to its above-average return and below-average risk. Year to date, the ETF has returned 12.3%, nearly double the 6.5% advance in the broader market S&P 500 index. PSCF also throws off a yield of 2.5%.
Turning to the chart, we can see that PSCF traded between $37 and $44 for over a year. Shares broke from that range on Aug. 5, with a breakaway gap from $44 to $44.42. The break was confirmed after a two-week consolidation with a string of six new highs. And PSCF closed Tuesday just 3 cents from the day’s high at $45.83.
Near-term support is at $44.81, the 20-day moving average, with more significant support at the new bullish support line at $44.
Buy PSCF at $45.60 with a trading target of $52 for a potential return of 14%. Long-term investors should consider buying shares of this ETF as a cornerstone investment in small-cap financials.