An incline in People Pillar rating is the primary driver of Hilton Small-MidCap Opportunity ETF's upgrade to a Morningstar Medalist Rating of Bronze from Neutral. The portfolio maintains a cost advantage over competitors, priced within the second-lowest fee quintile among peers.  

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and an underweight in quality exposure compared with category peers. 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 earns an Average People Pillar rating. Management team members could invest more of their own money in the fund. The strategy has a solid parent that earns an Above Average Parent Pillar rating. This firm has had continuity among portfolio managers and a bench of long-tenured portfolio managers.

Analyst Rating

Clean Harbors

Kyndryl Holdings

Dycom Industries

Primoris Services

nVent Electric plc

EMCOR Group

Houlihan Lokey

CyberArk Software

Live Nation

Entegris

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. Hilton Small-Midcap Opportunity ETF earns an Above Average Process Pillar rating. 

The most meaningful contributor to the rating is the firm's five-year retention rate of 100% over 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 the experience of the management team, which averages nine years at this fund.

 This strategy skews toward smaller, more growth-oriented companies than its average peer in the Mid-Cap Blend Morningstar Category. Analyzing additional factors, the fund has held stocks with higher trading volumes compared to Morningstar Category Peers in 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. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided holding companies that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. 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 stocks tend to rise faster and fall harder than the broad market. High-volatility exposure contributes to stronger performance during bull markets, but often at the cost of losing more during downturns. Nevertheless, the fund's Volatility exposure was in line with peers in the latest month. 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 industrials and consumer defensive relative to the category average by 4.5 and 3.8 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and financial services, underweight the average by 5.7 and 4.9 percentage points of assets, respectively. The strategy owns 66 securities and is relatively top-heavy. Of the strategy's assets, 23.4% are concentrated within the top 10 holdings, as opposed to the category’s 15.4% average.

Above Average

Process

Hilton Small-Midcap Opportunity ETF earns an Average People Pillar rating. The most significant contributor to the rating is the firm's five-year retention rate of 100%. The size of the portfolio management team also supports the rating. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the rating is limited by the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns.


The team is backed by Charles A. Ragauss, the longest-tenured manager on the strategy, who provides 11 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.5 stars, demonstrating disappointing risk-adjusted performance compared with category peers. 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.

Average

People

Hilton Capital remains well-positioned in an increasingly competitive industry, earning it an Above Average Parent Pillar rating. Morningstar generates quantitatively driven content for managed investments covered by the Morningstar Quantitative Rating, collectively called MQR Analysis. This strategy's Parent Pillar MQR Analysis content was not generated because of insufficient data. To generate individualized content, MQR Analysis requires sufficient data to generate its framework of “mental models” designed to mimic content written by analysts. The Quantitative Parent Pillar uses an algorithm designed to predict the Parent Pillar rating analysts would assign the investment product if they covered it.

Parent

Hilton Small-MidCap Opportunity ETF

SMCO is an actively managed fund that focuses on generating returns while minimizing risk through its proprietary Small & Mid Cap Opportunities investment process (SMCO), which attempts to identify undervalued US stocks in the small- and mid-cap space.

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News for Hilton Small-MidCap Opportunity ETF ETF (SMCO)