Cambria Value and Momentum ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns an Average People Pillar rating. The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And momentum exposure is rooted in holding stocks currently on a winning streak. The strategy's parent organization earns the firm a Below Average 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

EMCOR Group

Toll Brothers

Vistra Energy

PulteGroup

Encore Wire

Mr. Cooper Group Inc

Mueller Industries

Perdoceo Education

M/I Homes

Green Brick Partners

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. Cambria Value and Momentum ETF earns an Average Process Pillar rating. 

The most meaningful contributor to the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The firm's five-year retention rate of 100% also contributes to the process. Lastly, the process is limited by the small size of its portfolio management team of one.

 This strategy tends to hold smaller, more undervalued companies compared with its average peer in the Long-Short Equity Morningstar Category. Examining additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to suffer from a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has had more exposure to high-momentum stocks over its peers in recent years. Momentum approaches bet that rising stocks will continue to rise and that lagging stocks will continue to lag. Compared with category peers, the strategy also had more exposure to the Momentum factor in the most recent month. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This contributes to a higher-risk, higher-reward approach. In this month, the strategy also had more exposure to the Volatility factor over 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 consumer cyclical and basic materials relative to the category average by 12.9 and 12.0 percentage points, respectively. The sectors with low exposure compared to category peers are technology and communication services, underweight the average by 16.3 and 8.6 percentage points of assets, respectively. The strategy owns 102 securities, and is in a category where the typical fund has 17.5% of assets within the top 10 holdings. And finally, in terms of portfolio turnover, on a year-over-year basis, 71% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

Cambria Value and Momentum ETF's sole listed portfolio manager has not yet proven they have a competitive advantage over others in the industry, leading to an Average People Pillar rating. Mebane T. Faber brings over 17 years of portfolio management experience to the table. Across strategies managed, Faber has an average Morningstar Rating of 3.3, indicating above-average risk-adjusted performance.  Isolating the analysis to the fund at hand, Mebane Faber has delivered inferior performance, lagging both the category benchmark and average peer over the past eight-year period. 

 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.

People

Cambria Investment Management is a small, niche exchange-traded fund provider that adequately serves its investors but carries considerable key-person risk, and recent changes raises questions.

Cambria focuses on active, systematic-equity and asset-allocation strategies that differentiate it from larger ETF firms. The firm’s ETF lineup is unique, with a focus on yield-, momentum-, and value-oriented funds as well as more-specific options such as its Cannabis ETF. Few of the firm’s 12 ETFs hold significant assets under management—its largest by far is Cambria Shareholder Yield, with USD 760 million in assets under management. The funds are priced well. Cambria hasn’t merged or liquidated funds but repurposed two since it entered the ETF business in 2013. It has also registered, but not yet launched, additional ETFs, and it’s unclear when they will be available.

Co-founder, majority owner, CEO, and CIO Meb Faber maintains a public profile that drives a notable investor following, underlining considerable key-person risk at the firm. Although Faber is largely detached from the operational aspects of the small firm, he sets the firm’s direction and is one of three investment professionals who support Cambria’s strategies (and serves as their only named portfolio manager). Cambria will add Toroso Investments as a subadvisor to its suite of ETFs effective Sept. 1, 2023. Toroso’s cofounder and CIO, Michael Venuto, had been an independent trustee on Cambria’s three-person ETF board since 2019. Venuto abstained from voting on the Toroso hire and recently resigned from the board. Although Cambria’s choice of Toroso to implement its funds’ portfolio construction is reasonable, the decision nonetheless raises questions.

Below Average

Parent

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