Q4 2019 Sector Ratings For ETFs And Mutual Funds by David Trainer

Summary

  • Our sector ratings are based on the normalized aggregation of our stock ratings for every stock in each sector.
  • The primary driver behind an attractive fund rating is good portfolio management (stock picking) combined with low total annual costs.
  • Cheap funds can dupe investors and investors should invest only in funds with good stocks and low fees.
  • Looking for a portfolio of ideas like this one? Members of Value Investing 2.0 get exclusive access to our model portfolio. Get started today »

At the beginning of the fourth quarter of 2019, only the Telecom Services, Consumer Non-cyclicals, and Financials sectors earn Attractive-or-better ratings. Our sector ratings are based on the normalized aggregation of our stock ratings for every stock in each sector. Our stock ratings are based on five criteria that assess a firm’s business strength and valuation. See last quarter’s Sector Ratings here.

Investors looking for sector funds that hold quality stocks should look no further than the Financials and Consumer Non-cyclicals sectors. These sectors house a large portion of the highest rated funds. Figures 4 through 7 provide more details. The primary driver behind an Attractive fund rating is good portfolio management, or good stock picking, with low total annual costs.

Attractive-or-better ratings do not always correlate with Attractive-or-better total annual costs. This fact underscores that (1) cheap funds can dupe investors and (2) investors should invest only in funds with good stocks and low fees.

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]

See Figures 4 through 13 for a detailed breakdown of ratings distributions by sector.

Figure 1: Ratings for All Sectors

Source: New Constructs, LLC and company filings

To earn an Attractive-or-better Predictive Rating, an ETF or mutual fund must have high-quality holdings and low costs. Only the top 30% of all ETFs and mutual funds earn our Attractive or better ratings.

Fidelity Select Wireless Portfolio (FWRLX) is the top rated Telecom Services fund. It gets our Very Attractive rating by allocating over 40% of its value to Attractive-or-better-rated stocks.

Rydex Series Utilities Fund (RYUTX) is the worst Utilities fund. It gets our Very Unattractive rating by allocating over 84% of its value to Unattractive-or-worse-rated stocks. Making matters worse, it charges investors annual costs of 4.60%.

Figure 2 shows the distribution of our Predictive Ratings for all sector ETFs and mutual funds.

Figure 2: Distribution of ETFs & Mutual Funds (Assets and Count) by Predictive Rating

Source: New Constructs, LLC and company filings

Figure 3 offers additional details on the quality of the sector funds. Note that the average total annual cost of Very Unattractive funds is over eight times that of Very Attractive funds.

Figure 3: Predictive Rating Distribution Stats

  • Avg TAC = Weighted Average Total Annual Costs

Source: New Constructs, LLC and company filings

This table shows that only the best of the best funds get our Very Attractive Rating: they must hold good stocks AND have low costs. Investors deserve to have the best of both and we are here to give it to them.

...Read the Full Post On Seeking Alpha

Author Bio:

davidtrainer.png

Steem Account: @davidtrainer
Twitter Account: NewConstructs

Steem Account Status: Unclaimed

Are you David Trainer? If so, you have a Steem account that is unclaimed with pending cryptocurrency rewards sitting in it from your content. Your account was reserved by the Steemleo team and is receiving the rewards of all posts syndicated from your content on other sites.

If you want to claim this account and the rewards that it has been collecting, please contact the Steemleo team via twitter or discord to claim the account. You can also view the rewards currently sitting in the account by visiting the wallet page for this account.

What is Steemleo Content Syndication?

The Steemleo community is syndicating high-quality financial content from across the internet. We're also creating free Steem accounts for the authors of that content who have not yet discovered the Steem blockchain as a means to monetizing their content and we're listing those accounts as the 100% beneficiaries to all the rewards. If you want to learn more about Steemleo's content syndication strategy, click here.

Authors get paid when people like you upvote their post.
If you enjoyed what you read here, create your account today and start earning FREE STEEM!
Sort Order:  

Thank you for posting from the https://steemleo.com interface 🦁

Congratulations @leo.syndication! You have completed the following achievement on the Steem blockchain and have been rewarded with new badge(s) :

You received more than 5000 upvotes. Your next target is to reach 6000 upvotes.

You can view your badges on your Steem Board and compare to others on the Steem Ranking
If you no longer want to receive notifications, reply to this comment with the word STOP

Vote for @Steemitboard as a witness to get one more award and increased upvotes!