Editor’s note: an earlier version of this article stated that XUFB was the first US banks ETF on the LSE. This was incorrect, it is, in fact, the third after iShares and Lyxor. We regret the errors. (4/12/2018)
DWS will make it easier for Britons to invest in American banks, listing DWS’ first US banks ETF on the London Stock Exchange. The Xtrackers MSCI USA Banks UCITS ETF (XUFB) will build on Xtrackers list of US sector ETFs – which includes a US financials ETF – and hone laser-like on the US banking sector.
XUFB will track the MSCI USA Banks 20/35 Capped Net Total Return USD Index. The index, tailor made by MSCI’s index factor just for this product, will track a smorgasbord of US banks, from big to small, and cap the biggest bank at 35% of the index’s weight, while capping all the rest at 20%.
It will charge 0.12%.
Analysis – looks promising
It’s a sign of the times that investors don’t want to buy banks. Goldman Sachs and Citigroup, quality companies if anything, are trading at a price-to-book ratios of less than 1. JPMorgan, another quality company, is on a PB of 1.5. While Bank of American is on a PB of 1.1.
What investors want instead is tech stocks. And not just the self-evident FANGs, but also tech cross overs like Intuitive Surgical, in healthcare, and Mastercard, Visa in finance.
Our own feeling is that investors should be patient and copy Warren Buffett. While Buffett has been buying some select quality tech companies – like Apple and Oracle – his clear focus is on financials. In recent years he’s has been hoarding bank shares. So much so that five of his ten largest holdings by market value are banks, including Bank of America, Wells Fargo, US Bancorp and Goldman Sachs.
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