ETFs
ETFs worth a look following Russell index shakeup
Popular Russell indices are set to get their usual new look this month. Each year on the fourth Friday in June, the Russell 1000, Russell 2000, Russell 3000 and other Russell indices undergo rebalancing. This reshuffling has historically triggered high volatility in the markets for dozens of reshuffled securities.
The rebalancing will likely have a significant impact with a growing number of technology stocks in the Russell 1000 and more health care stocks in the Russell 2000. ETFs targeting Russell indexes are currently the center of attention. These include iShares Russell 1000 ETF TBI, Vanguard Russell 1000 ETF VONE, iShares Russell 2000 ETF IWM, Vanguard Russell 2000 ETF VTWO and iShares Russell 3000 ETF IWV.
Russell 1000: a big upheaval
Most of the change will be to the Russell 1000 Index, which tracks the top 1,000 stocks in the Russell 3000 Index. About 39 new companies are expected to join the Russell 1000 Index, including 28 companies that will move from the small-cap spectrum to the large cap index. Stocks that outperformed the Russell 2000 Index will now qualify for the Russell 1000 Index. Super Micro Computer Inc., Microstrategy, Carvana, Permian Resources and Comfort Systems USA are among them.
Technology, Consumer Discretionary and Energy will be the leading sectors of the Russell 1000 Index after the rebalancing. Other sectors such as industrial products, healthcare, financial services and consumer staples will also see new representation from the remaining 11 companies.
For the first time since 2020, Microsoft will regain Apple’s largest corporate position in the Russell 3000 and Russell 1000 indices. Nvidia will move to third place, pushing Alphabet to fourth. The fifth largest company, Amazon.com, will replace Berkshire Hathaway (now seventh), followed by Meta Platforms in sixth place. Broadcom, a semiconductor company, will now rank ninth, marking the most significant jump among the 10 largest companies, from 24th place in 2023. Eli Lilly will replace Exxon Mobil at the eighth position and Tesla will round out the list of the 10 largest companies (read: NVIDIA rushes to overtake Apple: ETFs poised to gain more).
“Magnificent Seven” (Microsoft, Apple, Nvidia, Alphabet, Amazon.com, Meta, Tesla) increased their company’s total market capitalization by 43.5%, to $13.2 trillion, from $9.2 trillion dollars last year.
In this year’s reconstitution, three recent initial public offerings (IPOs) will be added to the Russell 1000 Index (one company each in the technology, consumer discretionary and industrials sectors), and 11 IPOs in stock market will be added to the Russell 2000 Index. Seven of the additions to the Russell 2000 IPO represent health care, with the other four representing the technology, industrials, real estate and financial sectors. ‘energy.
The story continues
Other Russell Index Reshuffles
Health care companies will replenish the Russell 2000 index with seven of the eleven IPOs. Some notable new additions to the Russell 3000 will be Ocugen, Eledon Pharmaceuticals, NN Inc., and Bitcoin Depot. Computer manufacturer Dell Technologies will participate in the Russell 3000 for the first time.
While 30 companies will move from the Russell 1000 to the smaller-cap Russell 2000, 116 companies are expected to move out of the Russell Microcap Index, which includes smaller public companies.
ETFs in the spotlight
iShares Russell 1000 ETF (IWB)
The iShares Russell 1000 ETF provides exposure to large U.S. companies by tracking the Russell 1000 index. It has amassed $35.5 billion in assets and trades an average daily volume of 611,000 shares. It charges 15 basis points in annual fees and has a Zacks ETF Rank #3 (Hold).
Vanguard Russell 1000 ETF (VONE)
The Vanguard Russell 1000 ETF also tracks the performance of the Russell 1000 Index, charging an 8 basis point annual fee. It has assets under management of $4.7 billion and trades an average daily volume of 56,000 shares. VONE has a Zacks ETF Rank #3 (read: 5 ETFs Leading the Small-Cap Rally).
iShares Russell 2000 ETF (IWM)
The iShares Russell 2000 ETF is the largest and most popular ETF in the small-cap space, with $58 billion in assets under management and an average daily volume of 27 million shares. It charges 19 basis points in annual fees and has a Zacks ETF Rank #2 (Buy).
Vanguard Russell 2000 ETF (VTWO)
The Vanguard Russell 2000 ETF tracks the Russell 2000 index, charging 10 basis points in annual fees. It has accumulated $9 billion in assets and trades an average daily volume of 1.1 million shares. The product has a Zacks ETF Rank #3.
iShares Russell 3000 ETF (IWV)
The iShares Russell 3000 ETF tracks the Russell 3000 Index, charging 20 basis points in annual fees. It has amassed $13.7 billion in assets and trades an average of 112,000 shares per day. IWV has a Zacks ETF Rank #2.
Want the latest recommendations from Zacks Investment Research? Today you can download the 7 best stocks for the next 30 days. Click to get this free report
iShares Russell 2000 ETF (IWM): ETF Research Reports
iShares Russell 3000 ETF (IWV): ETF Research Reports
iShares Russell 1000 ETF (IWB): ETF Research Reports
Vanguard Russell 1000 ETF (VONE): ETF Research Reports
Vanguard Russell 2000 ETF (VTWO): ETF Research Reports