A New ETF With an Old-School Twist: Investing in Centenarian Stocks

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The recent rise to prominence of ETFs has been a boon for investors who want to take a diversified approach toward investing in a hot industry or sector. Want to invest in biotech? There's IBB. Interested in betting on the housing comeback? You can buy XHB. You can even play the solar sector with the cleverly named TAN.

And now you can use an ETF to invest in something different: strength, stability and longevity.
Taylor Hill/Getty ImagesIf a company hasn't been around since before photographer Editta Sherman was a baby (the art world icon died in November at 101), it won't be found in the NYCC, a new ETF that tracks the New York Stock Exchange's century index.
Invesco PowerShares recently announced the launch of a new ETF based on the New York Stock Exchange's century index, which includes companies that have a market capitalization of at least $1 billion, have been incorporated for at least 100 years, and are listed on major U.S. exchanges. Over the last three years, according to NYSE Euronext's data, the century index has outperformed the S&P 500 (^GPSC), Dow Jones industrials (^DJI) and the Nasdaq composite (^IXIC)by a wide margin.

The list of companies that will be held by the new ETF, which goes by the symbol NYCC, has yet to be released, but the century index includes 372 stocks, among them such venerable names as Coca-Cola (KO), Macy's (M), Monsanto (MON), Wells Fargo (WFC), General Mills (GIS) and IBM (IBM).

Of those stocks, 48 percent are mid-caps and 41 percent are large caps. The four largest sectors represented are financials at 24 percent, industrials at 20 percent, and consumer and utilities, both coming in at 10 percent. Technology and telecom names are minor players: Combined, they make up less than 5 percent of the index.

This ETF may be a good option for investors who want long-term exposure to the broad market, but who also seek safety from economic downturns.

"The PowerShares NYSE Century Portfolio invests in household names that have defined the American economy for more than a century," says Invesco CEO Martin L. Flanagan. "We believe NYCC offers investors targeted exposure to companies that have demonstrated the ability to innovate, transform, and grow through decades of varying economic cycles, political conditions, and social change."

Designed as an equally weighted fund, the ETF gives the same importance, or "weight," to each stock in the overall allocation. This decreases the fund's exposure to stocks that are overvalued, while increasing exposure to those that are undervalued, which helps to provide stability.

There's currently no other ETF that competes directly with NYCC. But before you buy it, be aware that with an expense ratio of 50 basis points (meaning it costs $50 for every $10,000 invested), it's much less cost-effective to own than the majority of other U.S. based ETFs.

NYCC represents a different way of thinking in the world of ETFs and, if successful, with the investing public, might spawn a new generation of value-focused funds.

No man is an island, or even a peninsula, so I encourage your feedback in the comments below. I also want to hear what else you'd like me to write about, so please let me know either by connecting with me on Twitter, or via email.


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Anthony J. Alfidi

This is another dumb investing idea. Investing in a company just because it's been around for a long time means nothing. These could be slow-growth companies in stagnant industries that are ripe for disruption. Newspaper stocks have been around forever but they cratered when people started reading news on the Internet. http://www.alfidicapital.com

January 22 2014 at 6:27 PM Report abuse rate up rate down Reply
Kosanya Deakotz

http://kosanya.hubpages.com/hub/My-First-Experience-as-a-New-Stock-Investor

January 22 2014 at 4:54 PM Report abuse rate up rate down Reply
molly2peaches

All the ETF's I have trade at a 10% discount to the NAV's. WTF is that? It's like owning MSFT, at 36 but nooo, YOU can only sell it for 32.40 Screw that.

January 22 2014 at 4:30 PM Report abuse rate up rate down Reply
remendell

OK, what pray tell is an ETF?

January 22 2014 at 2:48 PM Report abuse rate up rate down Reply
1 reply to remendell's comment
Valerie

ETF is shorthand for an Exchange Traded Fund. You can buy and sell an ETF much the same as you would an individual stock.

January 22 2014 at 3:17 PM Report abuse rate up rate down Reply