Motley Fool 100 ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive 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 yield exposure and quality exposure compared with category peers. High yield exposure is attributed to holding more stocks with high dividend or buyback yields. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. The team managing the passive strategy earns the strategy an Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like overall low fees and a strong risk-adjusted track record. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Microsoft

Apple

NVIDIA

Alphabet

Amazon

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Broadcom

Visa

JPMorgan Chase & Co

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. Motley Fool 100 ETF earns an Above Average Process Pillar rating. 

The leading factor in the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Noteworthy risk-adjusted performance also strengthens the process. This can be seen in the fund's five-year alpha calculated relative to the category average, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 25%. 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 modest success ratio suggests that the firm could do better across its fund lineup.

 This strategy targets larger plays than its peers’ average in the Large Growth Morningstar Category. But in terms of investment style, it is on par with peers. Examining additional factor exposure, the managers have consistently overweighted yield-paying companies compared with Morningstar Category peers in recent years, shown by the portfolio's high exposure to stocks paying dividends or buying back shares. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt stock performance. Different from its historical appetite, however, the strategy was less exposed to the Yield factor compared with Morningstar Category peers in the most recent month. This strategy also has had a defensive tilt, with exposure to higher-quality stocks compared with peers in recent years. This means that the fund holds companies that are profitable, growing, and have solid balance sheets. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. Compared with category peers, the strategy also had more exposure to the Quality factor in the most recent month. In addition, this strategy has an underweight bias to the volatility factor, meaning investing in stocks that have a lower standard deviation of returns. 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. In this month, however, the strategy had more exposure to the Volatility factor 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 is overweight in financial services and communication services relative to the category average by 3.5 and 3.4 percentage points, respectively. The sectors with low exposure compared to category peers are healthcare and industrials, underweight the average by 4.6 and 3.1 percentage points of assets, respectively. The portfolio is composed of 103 holdings and is relatively concentrated. In particular, 60.5% of the fund’s assets are housed within the top 10 holdings, as opposed to the typical peer's 54.8%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 6% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Motley Fool’s team earns An Average People Pillar rating. The main contributor to the rating is the combined average five-year excess return of each manager, which suggests that the funds they manage have beat an average manager. A low cost, with fees that rank in its category's cheapest quintile, also bolsters the rating. Fees detract from net returns, so the managers have a lower expense hurdle to overcome. Lastly, the rating is limited by the turnover of talent across its parent firm. The firm's asset-weighted manager tenure of seven years suggests it could do more to retain portfolio managers.

Average

People

In a competitive industry, Motley Fool doesn't differentiate itself enough, leading to an Average Parent Pillar rating. An area of strength is the firm’s favorable fees for open-end and exchange-traded funds, demonstrating a firm-wide commitment to minimizing costs and maximizing investors’ returns. Fees for funds are, on average, within the lowest quintile of similarly distributed strategies. Motley Fool's risk-adjusted performance compares similarly to competitors. Across its open-end and exchange-traded funds, the firm’s average five-year Morningstar Rating is 3.3 stars, which is about standard. The firm has not had a durable product lineup. Specifically, its five-year risk-adjusted success ratio demonstrates that only 25% of products were both able to survive and beat their respective category median on a risk-adjusted basis. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development.

Parent

Motley Fool 100 Index ETF

TMFC tracks an index of 100 of the largest US companies identified by any of the Motley Fool publications, including the top companies in the Motley Fool IQ Database.

The Motley Fool is a well-known investment company that has a process for selecting stocks called the Motley Fool 100 Index. The Fund selects the 100 largest and most liquid US companies based on certain criteria. TMFC has outperformed the S&P 500, and the ETF that represents the index has received positive ratings from various sources.

TMFC: No Fooling, This ETF Is Worth Considering

Looking for broad exposure to the Large Cap Growth segment of the US equity market? You should consider the Motley Fool 100 Index ETF (TMFC), a passively managed exchange traded fund launched on 01/30/2018.

Should Motley Fool 100 Index ETF (TMFC) Be on Your Investing Radar?

Motley Fool 100 Index ETF is a large-cap growth ETF based on The Motley Fool's ratings and newsletters. Compared to the Nasdaq 100, the TMFC ETF is more concentrated in the top holdings, but less in technology and shows better fundamental metrics. However, performance and popularity bias don't justify the higher fee.

TMFC: Growth ETF With A Popularity Bias And A High Fee

Motley Fool 100 Index ETF is invested in 100 large companies featured in The Motley Fool's articles and newsletters. The TMFC ETF is close to the Nasdaq 100 in sector breakdown, valuation, growth metrics, top holdings, and has lagged the index since inception. Nevertheless, its 5-year return is superior to other smart beta ETFs.

TMFC: Beats Smart Beta ETFs, But Still Lags The Benchmark

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TMFC selects 100 large-cap stocks based on recommendations from Motley Fool analysts or from highly-ranked stocks in the provider's proprietary opinion database, "Fool IQ". Despite the suggestion of active management, TMFC's latest portfolio turnover rate is just 6.3% and similarities to passive ETFs like QQQ make its 0.50% expense ratio challenging to justify. My performance analysis reveals how TMFC performs well when market sentiment is overly positive, like in 2020 and 2023, but below average otherwise. Still, over time, the results are solid.

TMFC: How Motley Fool's Analyst-Driven Large-Cap Growth ETF Stacks Up

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On this episode of ETF Prime, VettaFi's Todd Rosenbluth reviewed the top five ETFs by flows in the first half of 2023 with host Nate Geraci. Darren Schuringa of ASYMmetric ETFs talked about the firm's Smart ETF suite, and Charly Travers of Motley Fool discussed portfolio management and their small-cap ETF.

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Goldman Sachs Hedge Industry VIP ETF

Investing in the AI sector has been one of the hottest trends in the stock market this year, with many investors looking to capitalize on the growth potential of this emerging industry. However, some investors may not want to go all-in on AI, preferring a more diversified approach to their investments.

A Diversified Approach to Investing in the AI Sector

TMFC is a quasi-active ETF that, under the hood, is more of a closet index fund that tracks the Nasdaq 100 very closely. The fund owns a few stocks that are not top QQQ holdings. However, these small differences are not enough to justify the higher fees.

TMFC: No Added Value, Avoid It

TMFC is a tech-heavy investment vehicle I have been covering since January 2022. The ETF has had a stellar start to 2023, outperforming the market; since my November note, it has also surprised on the upside.

Inflation-Is-Over Narrative Spurs TMFC's Returns, Does Not Make It A Long-Term Buy

TMFC invests in top-notch, superlative picks from the U.S. equity market upper echelon included in the Motley Fool 100 Index, which features the market-cap weighting schema. TMFC's commitment to large-size tech growth plays had strongly supported its gains since its inception in January 2018, allowing it to easily trounce IVV.

TMFC: Quality We Love, Valuation We Hate

TMFC is an ETF that invests in an around 100-strong cohort of mega/large-cap U.S. stocks, which TMF analysts consider are poised to outperform the market over time. 2022 for TMFC has been simply calamitous, with only March being more or less successful, with a positive total return of around 5%. The growth premia issue is the culprit.

TMFC: Declined As Expected, Factors Tell Whether It Can Recover Soon

The portfolio of TMFC, the ETF featuring U.S. heavyweight names from The Motley Fool's recommendation universe, has been recalibrated recently. The changes were rather cosmetic as just seven stocks were added and six removed.

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TMFC offers exposure to Motley Fool's top blue-chip stock picks. TMFC has a top-heavy equity mix with terrible valuation, though strong growth profiles.

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Since I published an unenthusiastic review of the Motley Fool 100 Index ETF, the fund has produced about twice the returns of the S&P 500. But don't be fooled: TMFC has outperformed because it is nearly a mirror-image of the Nasdaq, which has been on a tear in the past two years.

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