I hear a lot of stock market analysts talking about “buying quality” these days. Quality, as used in this context, equates to financial solvency. Simply put, companies with manageable debt and positive cash flow are the only thing Wall Street wants at the moment.

Everything else is being ignored until the coronavirus pandemic is over. Further below, I’ll show you how you can take advantage of an investment opportunity created by this dichotomy.

Take a glance at the chart below. The upper (red) line is the year-to-date performance of the SPDR S&P 500 Index ETF (SPY). The lower (blue) line is the same for the Invesco S&P 500 Equal Weight ETF (RSP).

Both funds own the exact same stocks, which are all the companies that comprise the S&P 500 Index. However, they do not own them in equal amounts.

The SPY is cap-weighted, as is the index. For that reason, it owns more of the bigger stocks and less of the smaller ones. The RSP is even-weighted, meaning it owns the same dollar amount of every stock in the index.

While the stock market was crashing last month, both funds fell hard. From its high on February 20 to its low on March 23, the RSP lost 40% of its value. During the same span, the SPY lost 35%.

Since then, it has been a different story. As of the end of last week, the SPY was down only 13% for the year while the RSP was at a 20% deficit.

That means the cap-weighted fund recouped nearly two-thirds of its peak loss over the past three weeks. At the same time, the even-weighted version regained only half of its peak loss.

Flight to Quality

The recent flight to quality is understandable. Nobody knows for sure how much longer the coronavirus pandemic will continue. Until it is fully contained, damage to the global economy will be considerable.

President Trump has intimated that the extreme quarantine restrictions currently in place will start being relaxed next month. Even if that proves true, the current enthusiasm for the most popular stocks may already be overblown.

Many of the “high quality” companies including Apple (NSDQ: AAPL), Amazon.com (NSDQ: AMZN), and Microsoft (NSDQ: MSFT) are due to release first-quarter earnings later this month. Each of them is considered to be bullet-proof due to their strong balance sheets and enormous cash flow.

Coincidentally, they are also the three most valuable companies in the S&P 500 Index. Even though they comprise less than 1% of the total number of stocks in the index, they account for roughly 14% of its cap-weighted allocation.

At the other end of the spectrum, the three smallest companies in the index combine for less than 2/10 of 1% of its value. In fact, the entire bottom half of the S&P 500 is worth less than just the top 10 stocks.

By rule, every S&P 500 index fund must rebalance its portfolio at least monthly to reflect the current value of each stock in the index. Most funds do that during either the first or last week of each month.

It should come as no surprise that the last week of March and the first week of April witnessed one of the strongest stock market rallies in history. And therein lays the opportunity I mentioned at that top of this article.

Also Read: Beware of Animal Spirits

Turn the Tables

Eventually, there should be some “reversion to the mean” after the coronavirus outbreak has been contained. When that happens, money should start coming back into the smaller companies that dwell in the bottom half of the S&P 500 Index.

Fortunately, there is an easy way to participate in that event. To do so, you can buy shares of the Reverse Cap Weighted U.S. Large Cap ETF (RVRS).

As its trading symbol implies, RVRS is designed to be the reverse of the S&P 500 in terms of weighting. In this fund, the smallest companies get the biggest weightings and vice versa.

Since large-cap stocks have been so popular lately, RVRS has underperformed the overall market. Through the end of last week, it was down 25% for the year.

This fund is tiny. It has total assets of only $6 million, with an average daily trading volume of about 5,000 shares. Its share price is very affordable, too, at less than $14 at the start of this week.

That makes RVRS ideally suited for self-directed investors wanting to participate in the unwinding of the current flight to safety that is bound to happen. By the way, it also pays a dividend yield of 2.7% while you wait for that to happen.

Admittedly, this idea is a bit unconventional and may not be suitable for everyone. If that includes you, I know of an investment program that has delivered double-digit returns under all types of market conditions.

I’m referring to a program devised by my colleague, Jim Fink. As chief investment strategist of Options for Income, Jim has made huge profits for his followers with his adept trading of options.

In fact, Jim has developed an options trading system that allows you to collect payments every Thursday, similar to a paycheck. Think of it as a “profit calendar.”

These payouts can range in value from $1,150 to $2,800, but average out to $1,692.50. Jim developed his strategy by studying the tried-and-true practices of Chicago pit traders and modifying them for use online.

It’s like getting an extra paycheck, week in and week out. The gain is so reliable, you can schedule it on your calendar. Jim made himself a wealthy man with his system. Now he wants to share his secrets with our readers.

Jim Fink makes money in rising or falling markets. How does he do it? Click here for his presentation