When a new strategy hits the Street and it gains assets at a significant rate over a very short period of time, the ability of this new program to absorb the new money is quickly tested.
A new exchange-traded fund named the iShares MSCI USA Minimum Volatility Index Fund (NYSEMKT: USMV) is an example of such a program. This ETF was brought to the marketplace on Oct. 18, 2011. In the first quarter of 2013, assets under management grew to $2.6 billion, with a whopping $1.6 billion coming into the fund during this period. This reflects an increase of almost 174% in assets to be managed.
The iShares MSCI USA Minimum Volatility Index Fund is a well diversified fund that holds 126 different stocks, re-balances on a semi-annual basis, and tracks the MSCI Minimum Volatility Index, which has been in use since May 30, 2008. See the holdings allocation and price charts below:
The top holding of the iShares MSCI USA Minimum Volatility Index Fund is Amgen, Inc. (NASDAQ:AMGN). As of April 25, its position is 1.6% of this ETF. I like the fact that there is no exposure to any one stock and that the total holdings in terms of different stocks are not overly expanded to hundreds (see the price chart of Amgen, Inc. (NASDAQ:AMGN)). Aside from the recent gap in the chart, I can see why this is a positive driver for the iShares MSCI USA Minimum Volatility Index Fund.
Amgen, Inc. (NASDAQ:AMGN) has a terrific first-quarter story. Revenue has increased by 5% and product sales increased by 6%. This has driven adjusted earnings per share up by 22%, and free cash flow increased from $800 million to $900 million. These financial results in connection with the inflows to purchase Amgen, Inc. (NASDAQ:AMGN) shares makes this attractive.
Next in line by weighting is Verizon Communications Inc. (NYSE:VZ). Verizon Communications Inc. (NYSE:VZ) similarly occupies about 1.6% of the iShares MSCI USA Minimum Volatility Index Fund on the same reporting date. Again, there is not too much to this one stock and the price chart below shows a very similar price pattern, especially during the most recent three months. I am starting to think a pattern is developing--more on this thought later.
Verizon Communications Inc. (NYSE:VZ) is another company that is delivering positive financial results in a highly competitive industry. First-quarter earnings per share increased by 15.3%, revenue from wireless sales and services increased by 8.6%, and FiOs revenue climbed 15.1%. The combination of improving financial performance and demand for the shares of this company offer tremendous opportunity to the investor. I like this one, too.