Distillate Small/Mid Cash Flow ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. The management team invests alongside the strategy's shareholders, which helps it earn an Average People Pillar rating. The strategy is part of a first-rate parent that has significant personal investments from managers and overall reasonable fees. These attributes support its Above Average Parent Pillar rating.

Analyst Rating

Williams-Sonoma

Dick's Sporting Goods

Snap-on

Chord Energy Corp

Owens Corning

Skyworks Solutions

Quest Diagnostics

Alpha Metallurgical Resources

United Therapeutics

Toll Brothers

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Distillate Small/Mid Cash Flow ETF earns an Above Average Process Pillar rating. 

The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 100%. 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. The size of the portfolio management team also contributes to the process. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by being an actively managed strategy. Historical data, such as Morningstar's Active/Passive Barometer, finds that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy targets deeper value plays than its peers’ average in the Small Value Morningstar Category. But in terms of market capitalization, it is on par with peers. Analyzing additional factors, this strategy has held more highly liquid stocks compared to Morningstar Category Peers in the past few years. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy also has had a position favoring high-quality stocks in recent years, which could contribute to higher downside risk protection. This means the fund holds consistently profitable, growing companies with solid balance sheets that may help it weather downturns better than Morningstar Category peers. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. Additionally, this strategy's portfolio has held more stocks with high dividend or buyback yields than peers over recent years. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield factor over 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 consumer cyclical and basic materials relative to the category average by 17.4 and 4.5 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and real estate, underweight the average by 19.6 and 5.5 percentage points of assets, respectively. The portfolio is composed of 152 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 16.2% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 28.1%.

Above Average

Process

Distillate Small/Mid Cash Flow ETF earns an Average People Pillar rating. The most important driver of the rating is its parent firm's five-year success ratio of 100%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The size of the portfolio management team also contributes to the rating. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the rating is limited by the turnover of talent across its parent firm. The firm's asset-weighted manager tenure of six years suggests it could do more to retain portfolio managers.


Matthew T. Swanson, the longest-tenured manager on the strategy, provides strong guidance, bringing forward 17 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, reflecting average risk-adjusted performance in comparison to category peers. At least one member of the team has invested $1 million or more of their own capital in the fund, which helps align their interests with the strategy's investors.

Average

People

Distillate Capital has a strong investment culture as a firm, resulting in an Above Average Parent Pillar rating. A mark that sets this steward apart is that managers invest significantly alongside fundholders. Almost 67% of the firm’s assets are covered by a $1 million investment, in an effort to align portfolio manager and shareholder interests. The firm stands out in its commitment to investor values by offering an open-end and exchange-traded product lineup at a low cost. On average, the firm charges fees on its funds that are within the second cheapest quintile of its category. With an average asset-weighted tenure of six years among the longest-tenured managers at Distillate Capital, the firm is on par with peers. Seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions.

Parent

Distillate Small/Mid Cash Flow ETF

DSMC is an actively managed portfolio of US mid- and small-cap stocks selected based on free cash flow yield.

Distillate U.S. Fundamental Stability & Value ETF

Investing in stocks with the mindset of a company owner is what's given some of Distillate Capital's best ETFs an edge. The post These ETFs Help You Invest Like An Owner, Not A Speculator appeared first on Investor's Business Daily.

These ETFs Help You Invest Like An Owner, Not A Speculator

The active fund will be the value firm's third ETF.

Distillate Capital Launches Small, Midcap ETF

Distillate Capital, a fundamentals-driven equity manager focused on delivering highly differentiated risk-managed value investing strategies, today announced the launch of the Distillate Small/Mid Cash Flow ETF (NYSE Arca: DSMC), the newest addition to the firm's ETF lineup built around the firm's measures of quality, risk, and value as seen through the lens of free cash

Distillate Targets SMID-Cap Stocks With Strong Free Cash Flow Generation Through DSMC

CHICAGO--(BUSINESS WIRE)--Distillate launches Small/Mid Cash Flow ETF DSMC, adds to lineup built on proprietary measures of quality, risk, value through lens of free cash flow

News for Distillate Small/Mid Cash Flow ETF ETF (DSMC)