Large Cap Blend Style 3Q18: Best and Worst

David Trainer  |


The Large Cap Blend style ranks second out of the twelve fund styles as detailed in our 3Q18 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Large Cap Blend style ranked first. It gets our Attractive rating, which is based on an aggregation of ratings of 79 ETFs and 811 mutual funds in the Large Cap Blend style. See a recap of our 2Q18 Style Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all Large Cap Blend style ETFs and mutual funds are created the same. The number of holdings varies widely (from 7 to 1510). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Large Cap Blend 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] 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 & Worst Ratings – Top 5

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

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

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Gotham Institutional Value Fund (GINVX) and Clarkston Select Fund (CIDDX) are excluded from Figure 2 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

IQ Chaikin U.S. Large Cap ETF (CLRG) is the top-rated Large Cap Blend ETF and GMO Quality Fund (GQLOX) is the top-rated Large Cap Blend mutual fund. Both earn a Very Attractive rating.

Davis Select U.S. Equity ETF (DUSA) is the worst rated Large Cap Blend ETF and Footprints Discover Value Fund (DVALX) is the worst rated Large Cap Blend mutual fund. DUSA earns an Unattractive rating and DVALX 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. Don’t just take our word for it, see what Barron’s says on this matter.

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 Large Cap Blend ETFs and mutual funds.

Figure 3: Separating the Best ETFs from the Worst Funds

Sources: New Constructs, LLC and company filings

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

Sources: New Constructs, LLC and company filings

This article originally published on July 19, 2018.

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

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[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] Ernst & Young’s recent white paper "Getting ROIC Right" proves the superiority of our holdings research and analytics.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
FLQL Franklin LibertyQ U.S. Equity 31.29 -0.03 -0.10 168,788 Trade
QUAL iShares Edge MSCI USA Quality Factor 90.89 0.05 0.06 76,961 Trade
RVRS Reverse Cap Weighted US Large Cap 16.93 -0.02 -0.12 1,400 Trade
CLRG IQ Chaikin U.S. Large Cap ETF 26.38 0.00 0.00 0 Trade
PMOM Principal Sustainable Momentum Index ETF 29.90 0.00 0.00 0 Trade
EPS WisdomTree U.S. Earnings 500 Fund 32.87 0.07 0.20 322
JKD iShares Morningstar Large-Cap 169.57 0.25 0.15 2,664
SPXT ProShares S&P 500 Ex-Technology 55.76 -0.38 -0.67 503

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