The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Horizon Kinetics Medical ETF to a Morningstar Medalist Rating of Negative.  The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy’s management team earns a Below Average People Pillar rating. The strategy merits an Average Process Pillar rating.  High yield exposure is attributed to holding high dividend-paying or buyback stocks, and is suitable for income seekers outside of fixed-income. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The strategy's parent organization earns the firm a Low Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Eli Lilly

AbbVie

Amgen

Bristol-Myers

Johnson & Johnson

Merck

Pfizer

Regeneron Pharmaceuticals

Biogen

CRISPR Therapeutics

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. Horizon Kinetics Medical ETF earns an Average Process Pillar rating. 

The leading factor in the rating is the firm's five-year retention rate of 100% over the period. The stability of the management team also strengthens the process. Specifically, the fund has not seen a manager change in the last 24 years. Lastly, the process is limited by its parent firm's disappointing risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 1.2 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy skews toward larger, more undervalued companies than its average peer in the Health Morningstar Category. Looking at additional factor exposure, this strategy has continually displayed high-yield exposure compared with Morningstar Category peers during recent years, holding more companies returning cash to shareholders via dividends or buybacks. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. In recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. The managers have also shown an underweight risk tilt, demonstrated by lower volatility exposure over peers in recent years. These low-risk stocks are typically at their best when markets are not. Low volatility exposure contributes to limited loss on the downside at the cost of a lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. Moreover, this strategy has been underweighting momentum stocks during these 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. In recent months, the strategy also had less Momentum 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 has allocations in its top two sectors, healthcare and financial services, that are similar to the category. The sectors with low exposure compared to category peers are technology and basic materials; however, the allocations are similar to the category. The strategy owns 39 securities and is relatively concentrated. Specifically, 57.2% of the fund’s assets are housed within the top 10 holdings, compared with the typical peer's 39.2%.

Above Average

Process

Horizon Kinetics Medical ETF earns a Below Average People Pillar rating. Peter B. Doyle, the longest-tenured manager on the strategy, provides strong guidance, bringing forward 24 years of portfolio management experience.  Peter B. Doyle has an experienced listed co-manager. Together, they average 24 years of portfolio management experience.  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. 

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

Horizon Kinetics Asset Management is an independent investment boutique with insufficient risk controls, an issue that is exacerbated by the firm’s lineup of thematic, highly concentrated portfolios. It warrants a Low Parent rating.

Co-founders Murray Stahl, Peter Doyle, and Steven Bregman jointly run the firm, but a massive firmwide position in a single stock overwhelms positives that come from the research team. Nearly a third, or $2.2 billion, of the firm’s $6.8 billion of assets under management as of June 2022 rested in a single stock: Texas Pacific Land TPL, a $13-billion-dollar real estate trust that owns vast tracts in Texas and earns royalties off grazing and oil leases. The stock accounts for more than 50% of assets in some strategies, which raises obvious risk-management and liquidity concerns should the stock sell off or the firm experience significant outflows. Additionally, there are conflicts of interest with firm CEO/CIO Stahl, as he is compensated by Texas Pacific Land for his seat on the board and is personally invested in the company. 

High fees across the fund lineup, a smattering of questionably timed fund launches, and the overhaul and renaming of strategies raise additional concerns. The firm saw multiple strategy closures during the dot-com bubble, and it has a history of launching products that seemingly chase fads and short-term asset flows.

Parent

Horizon Kinetics Medical ETF

MEDX actively invests in global companies within the broad health care sector. Stock selection and weighting emphasizes those invested in cancer research and pharmaceutical developments.

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NEW YORK, NY / ACCESSWIRE / January 30, 2023 / Horizon Kinetics LLC today launched the Horizon Kinetics SPAC Active ETF (NASDAQ:SPAQ) and the Horizon Kinetics Medical ETF (NASDAQ:MEDX). SPAQ was converted from the Kinetics Alternative Income Mutual Fund, and MEDX from the Kinetics Medical Mutual Fund, as part of tax-free reorganizations effective after the close of business on January 27, 2023.

News for Horizon Kinetics Medical ETF ETF (MEDX)