Timing Tech and Value | Contrarian Value | Catholic Values | Australian Leverage Definitions | Monopolies
ULTUMUS scours the globe for ETF launches doing something different. There is interest in timing value investing and a contrarian take on value. A Catholic values US index product now has a European ETF listed in Switzerland. A new product focuses on monopolists. In Australia a 28 year-old leveraged mutual fund strategy has just set up an ETF feeder.
Some investors have a lifelong and almost religious faith in value or growth but others have no loyalty to either approach and would rather switch between them. Pacer Cash COWZ 100-Nasdaq 100 Rotator ETF (QQWZ) makes monthly switches between the Nasdaq 100 index and the Pacer US Cash Cows 100 Index, which selects the 100 companies with the highest free cash flow yield in the Russell 1000 index.
Costs of 0.49% are higher than a pure Nasdaq or value ETF but could make sense if the rotation between the two enhances performance.
Invesco Comstock Contrarian Equity ETF (CSTK) is wagering on a revival of value and mid cap investing. The US equity market is dominated by large cap growth but CSTK has 38% in large cap value and 18% in mid cap value, along with 16% in large cap blend and 24% in mid cap blend.
Only two of its top ten holdings – Microsoft and Meta – overlap with the top ten in the S&P 500 and the top ten contain only one other tech name: Citco. The other seven are banks and healthcare names plus tobacco giant Philip Morris. CSTK’s top ten have more overlap with the Vanguard Value ETF, which only charges 0.04% against 0.35% for CSTK, though CSTK has more mid cap exposure.
Some investors are more interested in values than value and have excluded a number of healthcare companies. The shift from ESG to “faith-based” or “values-based” investing continues with Bountiful Enhancing the Common Good US Index now becoming available in Europe via a Leonteq Securities AG ETP with the divine ticker GODUS.
The Roman Catholic ethical investment philosophy is similar to many ESG approaches in excluding tobacco, recreational drugs, gambling and controversial weapons. The Catholic-specific exclusions include several healthcare and pharmaceutical related activities: embryonic stem cell research; cloning, in-vitro fertilization, contraceptives and emergency contraceptives. It is listed on SIX the Swiss Exchange and charges 0.75%, which is above average for a passive index tracker ETF.
We have never noticed price-gouging monopolies being excluded by religious or ESG ETFs, and The Monopoly ETF (MPLY) actively seeks out companies that have been subject to anti-trust investigations of monopoly power, amongst other measures of market power including patents and brand dominance. The factsheet does not yet disclose any holdings but does highlight four monopolistic industry groups: infrastructure, exchanges, aerospace and payments, where there are often only two or three players – such as Boeing and Airbus for jumbo jets.
It is managed by Neil Azous of Rareview Capital and sits on the Strategy Shares ETF platform. Costs of 0.79% are above average even for an active equity ETF, which seems unsurprising given the investment philosophy of picking companies with stronger pricing power.
Leveraged ETFs can go up to 10x leverage (a South Africa listed S&P 500 vehicle) though most leveraged launches use much less. First Sentier Investors has just launched First Sentier Geared Australian Share Fund Complex ETF (ASX: LEVR), an ETF wrapper for First Sentier’s geared mutual fund strategy that started 1997. Thus this is not a mutual fund conversion as such but rather the launch of an ETF parallel to a mutual fund strategy. Whereas US and European leveraged ETFs define leverage versus the net asset value Australians define “gearing” relative to gross asset value. This product can use up to 60% gearing, which is based on dividing its borrowing of 150% by gross assets of 250%. This would be called a 2.5x levered ETF in the US or Europe where the NAV is the denominator. It charges 0.95% but borrows at institutional rates below what retail investors would pay. Leveraged ETFs usually cost more: Proshares’ 3x levered Nasdaq 100 product, TQQQ, charges 0.97% in the US, which is more than 3 times the 0.20% TER on QQQ because some traders will pay a premium for the leverage.
