The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  Motley Fool Mid-Cap Growth ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The strategy receives a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in liquidity exposure and volatility exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And low volatility exposure is rooted in stocks that have a lower standard deviation of returns. The management team invests alongside the strategy's shareholders, which helps it earn an Average People Pillar rating. The strategy's parent firm has some investor-friendly attributes, like overall reasonable fees and a competitive average Morningstar Rating. As a result, the firm gets an Average Parent Pillar rating.

Analyst Rating

Axon Enterprise

Brown & Brown

Watsco

Tyler Technologies

Fastenal

Broadridge Financial

Globus Medical

Gentex

 StoneX Group

Alarm.com

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. Motley Fool Mid-Cap Growth ETF earns a Below Average Process Pillar rating. 

The process is bolstered by its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average overall Morningstar Rating of 3.3 stars. However, the rating is limited by the parent firm's five-year retention rate of 71%, which suggests it could do more to retain its portfolio managers. The parent firm's five-year risk-adjusted success ratio of 25% also holds the process back. 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.

 This strategy leans toward smaller, deeper value companies compared with its average peer in the Mid-Cap Growth Morningstar Category. Analyzing additional factors, this strategy consistently held some companies with relatively lower trading volume compared with Morningstar Category peers in the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy has also exhibited a tilt toward low-volatility stocks in recent years, meaning companies with a lower historical standard deviation of returns. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. Similarly, in recent months, the strategy also had less exposure to the Volatility factor than peers. In addition, this strategy has displayed lower yield exposure than peers, holding fewer companies with high dividend or buyback yields over recent years. This is demonstrated by the portfolio's low exposure to dividends or buybacks. While companies with high yields provide consistent income payments, they may cut payouts if their earnings fall. In recent months, the strategy also had less Yield 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 is overweight in industrials and real estate relative to the category average by 10.3 and 5.1 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 6.6 and 5.8 percentage points of assets, respectively. The portfolio is positioned across 31 holdings and is relatively top-heavy. Of the strategy's assets, 47.8% are concentrated within the top 10 holdings, compared to the category’s 25.9% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 18% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

Motley Fool Mid-Cap Growth ETF 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 outperformed an average manager. A low expense ratio also strengthens the rating, with fees ranking in its category's second-cheapest quintile. Fees detract from net returns, so the managers have a lower expense hurdle to overcome. Lastly, the rating is limited by the parent firm's five-year retention rate of 71%, which suggests it could do more to hold onto its portfolio managers.


Anthony L. Arsta, the longest-tenured manager on the strategy, boasts 14 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.3 stars, demonstrating encouraging risk-adjusted performance. Anthony L. Arsta has an experienced backdrop of support. The three listed managers boast 11 years of average listed portfolio management experience. The highest personal investment in the fund by any of its managers is between $100,000 and $500,000. That's on the low side--it would need to be more than $1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors. The fund has had about average portfolio manager turnover compared to other teams. Long-term stability strengthens a team's rating as it tends to support positive results. However, the most recent documented departure was 11 months ago.

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 Mid-Cap Growth ETF

TMFM is an actively-managed portfolio of US mid-cap companies with quality growth characteristics, selected based on qualitative and quantitative factors.

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