A Growth ETF For 2013

With just a few trading days left in 2012, it is fair to say, broadly speaking, that the soon-to-be completed year was kind to growth stocks. Even with a recent downturn, Apple Inc. (NASDAQ:AAPL) is up 28.4 percent for the year. Amazon.com, Inc. (NASDAQ:AMZN) is sitting on a gain of 49.4 percent and the list goes on from there.

However, as S&P Capital IQ notes, value stocks in the S&P 500 have outperformed the index’s growth constituents this year. The good news is that improvements in the U.S. and global economies, a recovery in S&P 500 earnings along with modest valuations mean 2013 could work out to be a good year for growth stocks.

One ETF with which to play a resurgence in large-cap growth names is the iShares S&P 500 Growth Index (NYSEARCA:IVW), which has over $6.6 billion in assets under management. The fund received an Overweight rating from S&P Capital IQ in a recent research note by the firm.

“Generally, growth stocks trade at a higher price to earnings (P/E) multiple to the broader market, but have appeal for their stronger earnings prospects,” said S&P Capital IQ in the note. “This is currently the case as, according to S&P/Dow Jones Indices data as of December 14, the S&P 500 Growth Index trades at a premium 2013 P/E multiple of 13.6X Capital IQ consensus estimated EPS for 2013, vs. the 12.5X of the broader S&P 500 Index, but had a P/E-to-growth ratio of 1.1X, vs. 1.2X.”

iShares S&P 500 Growth Index (NYSEARCA:IVW), which charges annual fees of 0.18 percent, is similar to many large-cap growth ETFs in that it is debatable as to how many of the fund’s holdings can legitimately wear the growth label. Apple and Google combine for about 10 percent of the ETF’s weight, but other top-10 holdings includes stocks that can be accurately described as value names including Exxon Mobil Corporation (NYSE:XOM), Johnson & Johnson (NYSE:JNJ) and The Procter & Gamble Company (NYSE:PG). S&P Capital IQ notes that it has Strong Buy or Buy ratings on eight of the ETF’s top-10 holdings.