The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  MarketDesk Focused U.S. Dividend ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee 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.  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. 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 continuity among portfolio managers but is held back by a relatively inexperienced portfolio management team.

Analyst Rating

Lockheed Martin

Paychex

Kimberly-Clark

Automatic Data Processing

Insperity

Texas Instruments

NextEra Energy

Quest Diagnostics

Microchip Technology

Hormel Foods

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. MarketDesk Focused U.S. Dividend ETF earns an Average Process Pillar rating. 

The main contributor to the rating is the firm's five-year retention rate of 100% over the period. A low expense ratio, with costs ranking in its category's least costly fifth, also strengthens the process. A higher expense ratio reduces net returns, so being affordable gives this fund a significant advantage. Lastly, the process is limited by the experience of the management team, which averages five months at this fund.

 This strategy, over time, has preferred smaller market-cap companies, compared with others in the Large Value Morningstar Category.  But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Examining additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also demonstrated a bias towards lower-momentum stocks over its peers over the past years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. During the last few years, this strategy has also tilted in favor of high-quality stocks, those that have demonstrated low financial leverage and solid return on equity. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. In this month, the strategy also had more exposure to the Quality 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 defensive and utilities relative to the category average by 10.8 and 8.0 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and healthcare, underweight the average by 11.0 and 6.9 percentage points of assets, respectively. The portfolio is composed of 66 holdings and is less top-heavy than peers. Specifically, 20.6% of the fund’s assets are concentrated within the top 10 fund holdings, as opposed to the typical peer's 27.4%.

Average

Process

MarketDesk Focused U.S. Dividend 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 limited by the experience of the management team, which averages five months 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 remains inexperienced compared to better-resourced rivals. The longest-tenured manager, Jonathon S. Clements, brings little listed portfolio management experience to the table. They are currently not managing any other investment vehicles, with their focus devoted to this strategy. Jonathon S. Clements's supporting team is small and largely unproven, with only one other listed manager. Together, they average less than one year of listed portfolio management experience.

Below Average

People

A short track record, in this case only five months, is usually cause for caution when evaluating asset managers. However, MarketDesk has displayed qualities that suggest it can be trusted as much as the next asset manager, earning it an Average Parent Pillar rating. The firm currently manages one vehicle, with a total of $87.4 million under management across a team of two portfolio managers. The management team at MarketDesk is unproven. Because the team members average less than six months in the industry, there's reason to be cautious until they grow more seasoned. The firm's earliest portfolio manager hire, Jonathon S. Clements, has only one year of industry experience. 
 
   

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

Parent

Marketdesk Focused US Dividend ETF

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First Trust Announces Shareholder Approval of New Investment Strategy for First Trust Strategic Income ETF

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