The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Brookstone Dividend Stock ETF to a Morningstar Medalist Rating of Negative.  Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-highest quintile among peers.  

 The strategy's inexperienced portfolio management team drives the strategy's Below Average People Pillar. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial overweight position in liquidity exposure and has a significant underweight in momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. To be considered a quality steward, this strategy's parent organization needs to improve factors like a lack of inside investments from portfolio managers and portfolio managers with limited tenures at the firm. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

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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. Brookstone Dividend Stock ETF earns an Average Process Pillar rating. 

The most important driver of the rating is the firm's five-year retention rate of 100% over the period. The scale of the portfolio management team also bolsters the rating. With five portfolio managers, the fund is well-staffed. Lastly, the process is limited by the experience of the management team, which averages four years at this fund.

 This strategy skews toward smaller, more undervalued companies than its average peer in the Large Value Morningstar Category. Looking at additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. More-liquid assets are easier to buy and sell without adversely moving their prices and tend to provide some ballast during market selloffs. They also are easier to sell to meet redemptions if a host of investors decide to leave the fund in a short period of time. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also taken a contrarian approach with lower exposure to momentum stocks over peers in recent years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. In recent months, the strategy also had less Quality factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in utilities and real estate relative to the category average by 18.2 and 6.1 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and technology, underweight the average by 12.0 and 9.2 percentage points of assets, respectively. The portfolio is composed of 31 holdings and is relatively concentrated. Specifically, 35.0% of the strategy's assets are housed within the top 10 holdings, as opposed to the typical peer's 27.4%.

Average

Process

Brookstone Dividend Stock ETF earns a Below Average People Pillar rating. The team benefits from the firm's five-year retention rate of 100%. However, the rating is weakened by the experience of the management team, which averages four years at this fund. The number of months that the management team has been running this vehicle together also holds the rating back. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.


The team is backed by Mark W. DiOrio, the longest-tenured manager on the strategy, who provides 17 years of listed portfolio management experience.  Although the team size is solid, together they are largely unproven. With four additional supporting listed managers, the team averages four years of listed portfolio management experience.

Below Average

People

Brookstone Asset Management, with only six months of history as a firm, is too nascent to prove whether it has an edge over the competition, leading to a Below Average Parent Pillar rating. The firm currently manages eight vehicles, with a total of $337.5 million under management across a bench of five strategy managers. The management team at Brookstone Asset Management is unproven. Because the team members average just over four years in the industry, there's reason to be cautious until they grow more seasoned. The firm's earliest portfolio manager hire, Mark W. Diorio, has 17 years of industry experience. 
 
   

 As Brookstone Asset Management builds and continues to develop a track record, its rating will be adjusted accordingly.

Parent

Brookstone Dividend Stock ETF

BAMD actively selects income-producing US stocks or ETFs based on external and internal research. It selects both mid- to large-cap securities.

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