The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Sprott Lithium Miners ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The team managing the passive strategy earns a Below Average People Pillar. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable 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 strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

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 index on a risk-adjusted basis over the long term. Sprott Lithium Miners ETF earns an Average 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. Low costs across its parent firm's funds, whose fees, on average, rank in the middle quintile of their respective category, also contribute to the process. The pattern of low costs at the firm indicates that it is focused on delivering strong results for investors. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 43%. 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 parent's relatively low success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Nasdaq Sprott Lithium Miners Index.  The fund will, under normal circumstances, invest at least 80% of its total assets in securities of the index. The index is designed to track the performance of companies that derive at least 50% of their revenue and/or assets from mining, exploration, development, and or production of lithium. The index generally consists of from 40 to 50 constituents. The fund is non-diversified. 

 The portfolio is overweight in basic materials by 52.5 percentage points in terms of assets compared with the category average, and its financial services allocation is similar to the category. The sectors with low exposure compared to category peers are energy and industrials, underweight the average by 27.8 and 10.6 percentage points of assets, respectively. The strategy owns 47 securities and is quite concentrated. In particular, 75.8% of the fund’s assets are housed within the top 10 holdings, versus the category’s 23.9% average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 59% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Sprott’s team earns a Below Average People Pillar rating. The team is bolstered by the combined average three-year excess return of each manager, which suggests that the funds they manage have surpassed an average manager. However, the rating is weakened by the parent firm's five-year success ratio of 30%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 50% also holds the team back.

Below Average

People

Sprott's focus on a niche area of the market and some mixed characteristics lead to an Average Parent rating.
This firm has undergone several changes in the past five years. In 2017, the firm spun off the non-precious-metals vehicles it had launched over the prior decade, and founder Eric Sprott retired. Getting back to its roots, the firm has since consolidated one of Canada's gold exchange-traded funds into its own and acquired a gold ETF, a silver ETF, and a U.S.-based, actively managed open-end mutual fund focused on gold-mining stocks. Sprott has recently expanded its lineup to include critical minerals, namely a uranium ETF and a physical platinum and palladium trust, but the firm remains largely focused on precious metals.
A relatively deep investment team manages this niche lineup. In 2022, 25-year industry veteran John Ciampaglia took over as Sprott Asset Management's CEO from Whitney George after George became Sprott Inc.'s CEO. That said, George remains involved in investment management, and an experienced 12-person team remains, including John Hathaway and Doug Groh, who came aboard as part of the firm's 2020 acquisition of Tocqueville's gold strategies. These resources could give the firm an edge, but key-person risk remains given the long tenures of Hathaway and George. Further, the firm's niche focus creates potential for large swings in both assets and performance.

Parent

Sprott Lithium Miners ETF

LITP aims to support the worldwide clean energy transition by tracking an index of global companies in the lithium industry. Securities are selected based on revenue and weighted by market-cap.

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News for Sprott Lithium Miners ETF ETF (LITP)