Investing in ETFs to Track the S&P 500 or the Nasdaq 100

Investing in ETFs becomes really popular in the last few years. But, do you know, what are you buying when you are investing in an S&P500 or Nasdaq 100 ETF?

If I want to put $10,000 into S&P 500, I will invest $365 in Apple (AAPL), $260 in Microsoft (MSFT), $190 in Amazon (AMZN), $177 in Facebook (FB), $170 in Johnson & Johnson (JNJ), $164 in ExxonMobil (XOM) and the rest of the sum into another 494 companies. So the S&P 500 index is not equally weighted. The weight of the six largest members are 13.26%.

If you are curious about the full list you can read here: S&P 500 Companies by Weight.

The Nasdaq 100 shows greater concentration than S&P 500, and the weight of the six largest members are 42.01%.

If I want to put $10,000 into it, I will invest $1,160in Apple (AAPL), $826 in Microsoft (MSFT), $727 in Amazon (AMZN), $561 in Facebook (FB) $927 in Alphabet (GOOG and GOOGL) and the rest of the sum into another 94 companies.

You can read the full list of Nasdaq 100 here: Nasdaq 100 Companies.

Disclosure: Long XOM.

Recent Buy – Kroger

The Kroger Company (KR) operates supermarkets, multi-department stores, jewelry stores, pharmacies, fuel centers and convenience stores in the United States.

This week was really interesting. On Thuesday Kroger decreased the earnings guidance, on Friday Amazon (AMZN) announced to buy Whole Foods (WFM) for $13.7 billion. What was the reaction? The price of the Kroger shares was falling as a stone. It made me curious, so I looked through the company's financials.

Kroger Co. increased it's revenue from $70.235 billion to $115.337 billion over the period spanning fiscal years 2007 to 2016. That's a compound annual growth rate (CAGR) of 5.67%.

Over the same 10-year period, the company's diluted earnings per share grew from $0.84 to $2.05, which is a CAGR of 10.42%. I think that it's really impressive from such a large company, so take a look at it's dividend.

The company increased it's dividend in the last 11 years, with a ten year CAGR 13.85%. The dividend yield is 2.15% with the Friday's closing price. ($22.29) The payout ratio is really low, it's only 21.60%.

What is the valuation of Kroger Co.?

It has a TTM P/E 10.81, which is greatly below the stock market's P/E ratio. The Debt/Equity ratio is 2.10, which is not so great, but I think it's managable.

I think that the stock market overreacted the Amazon's transaction, and the Kroger Co. proved in the last 10 years that it can improve it's business. The company is buying back it's shares, so the recent decrease of the stock price is not just a good opportunity to buy the shares of this really good company, but it's a good opportunity for the company to buy back it's own shares to improve the shareholder's return.

On Friday I bought a few shares of Kroger Co. at $21.10 which gives me a 2.27% dividend yield.

Full disclosure: Long Kroger.