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iShares MSCI USA Minimum Volatility ETF (USMV)

The iShares MSCI USA Minimum Volatility Index ETF (USMV) seeks investment results that correspond to the price and yield performance of the MSCI USA Minimum Volatility Index. The ETF invests at least 90% of its assets in securities of the Index or in depositary receipts representing securities in the Index. USMV...

The iShares MSCI USA Minimum Volatility Index ETF (USMV) seeks investment results that correspond to the price and yield performance of the MSCI USA Minimum Volatility Index. The ETF invests at least 90% of its assets in securities of the Index or in depositary receipts representing securities in the Index.

USMV is currently selling at a very small 0.14% discount to its net asset value. The price to earnings ratio (P/E) of the stocks contained in the ETF is 25.0, and the price to book value ratio (P/BV) is 5.41. Both ratios are a little high, but beta, which is a measure of volatility, is a low 0.78. Management fees total 0.15%.

USMV is very well diversified with risk spread out over 134 holdings. The largest position consumes only 1.65% of the total portfolio. The 10 largest holdings in order of size are TJX, Paychex, ADP, General Mills, Johnson & Johnson, PepsiCo, Bristol-Myers, Lockheed Martin, Chubb and Eli Lilly. The five largest sectors are: HealthCare, Financials, Consumer Staples, Information Technology and Consumer Discretionary.

A recent report by Morningstar concluded: “in nearly every market studied, low-volatility stocks have outperformed high-volatility stocks.” USMV is a great addition to everyone’s portfolio. I expect USMV shares to reach my Min Sell Price of 47.00 within two years. Max Buy Price 34.00. Very Low Risk.

J. Royden Ward, Cabot Benjamin Graham Value Investor, www.cabot.net, 978-745-5532, September 2013

J. Royden Ward has spent his entire career seeking strong investment returns for his clients while keeping risk low. In 1969, he developed a computerized model of stock selection based on formulas created by investment legend—and Warren Buffett mentor—Benjamin Graham, and since 2003, he’s been spreading his wisdom far and wide as chief analyst of Cabot Benjamin Graham Value Investor.