Best And Worst Q4 2019: All Cap Growth ETFs And Mutual Funds

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Summary

The All Cap Growth style ranks seventh out of the twelve fund styles as detailed in our Q4'19 Style Ratings for ETFs and Mutual Funds report. Last quarter, the All Cap Growth style ranked ninth. It gets our Neutral rating, which is based on an aggregation of ratings of 26 ETFs and 545 mutual funds in the All Cap Growth style. See a recap of our Q3'19 Style Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all All Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 18 to 2082). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the All Cap Growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[2] Only our research utilizes the superior data and earnings adjustments featured by the HBS & MIT Sloan paper, “Core Earnings: New Data and Evidence.” We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best and Worst Ratings – Top 5

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Sources: New Constructs, LLC and company filings

Six ETFs are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best and Worst Ratings – Top 5

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Sources: New Constructs, LLC and company filings

American Beacon Alpha Quant Quality Fund (AQQIX, AQQYX, AQQPX), SGI Global Equity Fund (SGLIX), and AMG Renaissance Large Growth Fund (NLCGX) are excluded from Figure 2 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

TrimTabs All Cap U.S. Free Cash Flow ETF (TTAC) is the top-rated All Cap Growth ETF and Nuveen Large Growth Fund (NLAFX) is the top-rated All Cap Growth mutual fund. Both earn a Very Attractive rating.

First Trust U.S. Equity Opportunities ETF (FPX) is the worst rated All Cap Growth ETF and Sparrow Growth Fund (SGFFX) is the worst rated All Cap Growth mutual fund. FPX earns an Unattractive rating and SGFFX earns a Very Unattractive rating.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance.

Performance of Holdings = Performance of Fund

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: Cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all All Cap Growth ETFs and mutual funds.

Figure 3: Separating the Best ETFs from the Worst Funds

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Figure 4: Separating the Best Mutual Funds from the Worst Funds

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This article originally published on October 22, 2019.

Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.

[1] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

[2] This paper compares our analytics on a mega cap company to other major providers. The Appendix details exactly how we stack up.

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This paper compares our analytics on a mega cap company to other major providers. The Appendix details exactly how we stack up.

Harvard Business School featured our unique technological capabilities in “New Constructs: Disrupting Fundamental Analysis with Robo-Analysts”.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.