Weakness in Kingsbarn Dividend Opportunity ETF's People and Process Pillar ratings limits this strategy 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 most expensive quintile among peers.  

 The strategy's inexperienced portfolio management team drives the strategy's Low People Pillar. The strategy gets a Low Process Pillar rating.  High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The strategy's parent organization still has a way to go to reach the industry standard, evidenced by unsubstantial personal investments from portfolio managers and steep fees. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

AG Mortgage Investment Trust

ACRES Commercial Realty Corp.

Great Ajax

Two Harbors Investment

TPG RE Finance Trust

MFA Financial

Redwood Trust

Franklin BSP Realty Trust Inc

Apollo Commercial Real Estate Finance

Annaly Capital

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. Kingsbarn Dividend Opportunity ETF earns a Low Process Pillar rating. 

The main driver of the rating is high costs across its parent firm's funds, whose fees rank in their category's second-costliest quintile on average. While this fund's costs are most relevant to investors, the pattern at the broader firm suggests it could do more to keep expenses low. The parent firm's five-year retention rate of 75% also detracts from the process. Management team experience, which averages four months at this fund, weakens the process as well.

 This strategy leans toward smaller, deeper value companies than its average peer in the Large Value Morningstar Category. Examining additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last 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 has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. Such exposure tends to pay off when markets are hot and to be costly when they are not. In this month, the strategy also had more exposure to the Volatility 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 real estate and financial services relative to the category average by 71.5 and 5.3 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and technology, underweight the average by 14.7 and 12.4 percentage points of assets, respectively. The portfolio is positioned across 16 holdings and is relatively top-heavy. Of the strategy's assets, 70.2% are concentrated within the top 10 holdings, compared to the typical peer's 27.4%.

Process

Kingsbarn Dividend Opportunity ETF earns a Low People Pillar rating. The most significant detractor from the rating is the experience of the management team, which averages four months at this fund. The parent firm's five-year retention rate of 75% also detracts from the team. The number of months that the management team has been running this vehicle together detracts from the rating further. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.


None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

People

Since its inception only two years ago, Kingsbarn Capital has not demonstrated qualities that as stewards, build confidence. At this stage, the firm earns a Below Average Parent rating. Kingsbarn Capital currently manages two vehicles, with a total of $585,166 under management and a roster of three portfolio managers. Given its limited track record, this small management team is somewhat inexperienced, with an average of one year of industry experience.  

 Lofty fees on open-end and exchange-traded funds at Kingsbarn Capital detract from fund performance. Compared with its peers, the average expense ratio of the firm's fund lineup is in the second-costliest quintile.  

 To upgrade the firm's rating, Kingsbarn Capital will be expected to build a consistent track record of positive investor experience.

Below Average

Parent

Kingsbarn Dividend Opportunity ETF

DVDN is an actively managed, narrow portfolio of publicly traded equities issued by residential and commercial mortgage REITs or business development companies. The funds objective is to provide quarterly dividends and long-term capital appreciation.

Alternative asset manager Kingsbarn Capital Management launched the actively managed Kingsbarn Dividend Opportunity ETF (NYSE Arca: DVDN). The ETF targets equities issued by residential and commercial mortgage real estate investment trusts (REITs) and business development companies.

News for Kingsbarn Dividend Opportunity ETF ETF (DVDN)