Defiance Hotel, Airline, and Cruise ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in quality exposure and yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. The strategy’s management team earns an Average People Pillar rating. The People Pillar rating is indirectly assigned by an analyst rather than algorithmically derived. Please see the notes following pillar section for more details. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including overall reasonable fees but is held back by below-average portfolio manager retention.

Analyst Rating

Delta Air Lines

Hilton Worldwide Holdings

Marriott

Royal Caribbean Cruises

Carnival

United Continental Hlds

Southwest Airlines

American Airlines

Host Hotels & Resorts

Associated Capital Group

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Defiance Hotel, Airline, and Cruise ETF earns a High Process Pillar rating. The leading factor in the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's five-year risk-adjusted success ratio of 50% also supports the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their impressive success ratio suggests that the firm does well for investors and that this fund may benefit from that. The parent firm's risk-adjusted performance, as shown by its average overall Morningstar Rating of 2.7 stars, influences the rating as well.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the total return performance, before fees and expenses, of the BlueStar Global Hotels, Airlines, and Cruises Index (the “index”).  The index is a rules-based index that consists of globally-listed stocks of companies that derive at least 50% of their revenues from the passenger airline, hotel and resort, or cruise industries (“Travel Companies”) as determined by MV Index Solutions. Under normal circumstances, and the fund invests at least 80% of its net assets (plus borrowings for investment purposes) in Travel Companies. The fund is non-diversified. 

 The portfolio is overweight in industrials and real estate relative to the category average by 33.9 and 9.5 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and consumer defensive, underweight the average by 34.2 and 4.3 percentage points of assets, respectively. The portfolio is composed of 62 holdings and is quite concentrated. Specifically, 52.8% of the fund’s assets are housed within the top 10 holdings, as opposed to the category average of 44.1%. And finally, in terms of portfolio turnover, on a year-over-year basis, 16% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

Defiance’s team is good but unexceptional, earning the strategy an Average People Pillar rating. There are three managers listed on the fund: Dustin Lewellyn, Ernesto Tong, Anand Desai. Experience on the team is abundant, with 11 years of average portfolio management experience. Together, they manage a total of 32 strategies, with solid long-term prospects. The strategies average a Bronze asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

Defiance's track record as a steward is mixed, leading to an Average Parent Pillar rating. A strength of Defiance is that its product shelf of open-end and exchange-traded funds is, on average, offered at a minimal cost, suggesting that it considers what's best for its investor base. On average, fees for funds are in the lowest quintile of respective category peers. Defiance has undergone a bout of turnover in the past five years, as seen in its lower-than-average portfolio manager retention. This is a concern, as long-term stability tends to support positive results. The longest-tenured managers’ average tenure is slim, two years, compared with peer firms. This contributes negatively to the rating as the current managers have limited experience running strategies at the firm.

Parent

Defiance Hotel Airline and Cruise ETF

CRUZ tracks a modified market-cap-weighted index that gives global exposure to the airline, hotel and cruise industries.

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News for Defiance Hotel Airline and Cruise ETF ETF (CRUZ)