Motley Fool Capital Efficiency 100 ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the 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 yield exposure and an underweight in volatility exposure compared with category peers. 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 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 competitive average Morningstar Rating. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Alphabet

Amazon

Apple

Broadcom

NVIDIA

Walmart

Microsoft

Visa

UnitedHealth Group

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 Capital Efficiency 100 ETF earns an Above Average Process Pillar rating. The main driver of 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. The parent firm's excellent risk-adjusted performance, as shown by its average overall Morningstar Rating of 3.3 stars, also bolsters the process. 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 subpar 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 results that correspond (before fees and expenses) generally to the total return performance of the Motley Fool Capital Efficiency 100 Index.  The index is a proprietary, rules-based index designed to track the performance of the highest scoring stocks of U.S. companies, measured by a company’s capital efficiency, that have been recommended by TMF’s analysts and newsletters, and that also meet certain liquidity requirements. Under normal circumstances, and at least 80% of the fund’s total assets (exclusive of any collateral held from securities lending) will be invested in the component securities of the index. It is non-diversified. 

 The portfolio is overweight in consumer defensive by 6.4 percentage points in terms of assets compared with the category average, and its communication services allocation is similar to the category. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 6.6 and 2.7 percentage points of assets, respectively. The strategy owns 101 securities and is about as top-heavy as the category average, with 52.5% of assets in the top 10 holdings. And in closing, in terms of portfolio turnover, on a year-over-year basis, 25% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Motley Fool’s team receives An Average People Pillar rating. The main contributor to the rating is the portfolio managers' outperformance of peers at the funds they run, as measured by their combined three-year manager excess returns. A low cost, with fees that rank in its category's cheapest fifth, also contributes to the rating. Fees reduce net returns, so the team has a lower expense hurdle to overcome. Lastly, the rating is limited by the instability 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

Motley Fool is an industry-standard asset manager, resulting in an Average Parent Pillar rating. One notable advantage of Motley Fool is its below-average fees. On average, the firm's open-end and exchange-traded fund fees fall in the lowest quintile of category peers. 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. Motley Fool strategies have failed to have lengthy success. In particular, the firm's five-year risk-adjusted success ratio demonstrates that only 25% have both survived and beaten 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 Capital Efficiency Index ETF

TMFE seeks to track an index of 100 US stocks selected based on fundamental criteria of company growth, profitability, and stability. Weighting of holdings are determined by a combination of capital efficiency score and market-cap.

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ALEXANDRIA, Va.--(BUSINESS WIRE)--Motley Fool Asset Management, an affiliate of The Motley Fool, LLC,* today is proud to announce the launch of two new ETFs: Fool Capital Efficiency 100 Index and Fool Next Index. “We established these ETFs with investor demand in mind,” said Kelsey Mowrey, President of Motley Fool Asset Management. “Both ETFs are designed to be convenient, cost-effective vehicles for individuals who want exposure to stock recommendations made by Motley Fool analysts across Fool

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