A strong management team and sound investment process underpin Applied Finance Valuation LgCp ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The management team's considerable industry experience drives an Above Average People Pillar rating for the strategy. The strategy's sensible investment philosophy earns an Above Average Process Pillar rating.  High yield exposure is attributed to holding high dividend-paying or buyback stocks, and is suitable for income seekers outside of fixed-income. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. The strategy has a strong parent, as shown by its a strong success ratio across its product lineup. It still has weak spots to strengthen, including above-average turnover among its portfolio managers. The firm gets an Above Average Parent Pillar rating.

Analyst Rating

Apple

NVIDIA

Alphabet

Microsoft

Mastercard

Amazon

Visa

Broadcom

Merck

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. Applied Finance Valuation LgCp ETF earns an Above Average Process Pillar rating. 

The most notable contributor to the rating is the parent firm's five-year risk-adjusted success ratio of 100%. 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 firm's five-year retention rate of 90% also underpins the process. Lastly, the process is limited by high costs across its parent firm's funds, whose fees rank in their category's most-expensive quintile on average. While this fund's costs are most relevant to investors, the pattern at the broader firm suggests it could do more to keep fees down.

 This strategy tends to hold smaller, more undervalued companies compared with its average peer in the Large Blend Morningstar Category. Analyzing additional factors, 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. In recent months, the strategy was more exposed to the Yield factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt towards more high-liquid assets over peers in recent years, evidenced by consistently holding companies with relatively higher trading volumes. This gives the managers more flexibility during bear markets to sell without adversely affecting prices. Compared with category peers, however, the strategy had less Liquidity factor exposure in the latest month. In addition, this strategy has favored high-quality stocks compared to peers over the years, which could be a good option for downside risk protection. Though it may trail peers during an economic boom, this orientation contributes to helping it weather periods of economic stress better. Nevertheless, the fund's Quality 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 communication services and technology relative to the category average by 4.5 and 3.0 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and utilities, with industrials underweighting the average portfolio by 2.8 percentage points of assets and utilities similar to the average. The strategy owns 322 securities and is less top-heavy than peers. Specifically, 40.9% of the portfolio's assets are concentrated within the top 10 fund holdings, compared to the typical peer's 49.5%. And in closing, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.

Above Average

Process

Applied Finance Valuation LgCp ETF earns an Above Average People Pillar rating. The main contributor to the rating is the firm's five-year retention rate of 90%. The parent firm's five-year success ratio of 100% also influences the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. Their compelling success ratio suggests that the firm does well for investors and that this fund may benefit from that. Lastly, the rating is limited because no manager has invested more than $1 million in the fund, which would show confidence in the strategy.


The team is backed by Paul Blinn, the longest-tenured manager on the strategy, who provides 20 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 4.7 stars, indicating that their risk-adjusted returns exceeded the category average. Paul Blinn is supported by an experienced team, being able to draw on three additional listed managers, who average 16 years of listed portfolio management experience.

People

Applied Finance has a strong investment culture as a firm, resulting in an Above Average Parent Pillar rating. However, portfolio manager retention could be an area of improvement for the firm. Applied Finance has had higher turnover over the past five years, compared to peers, possibly signaling an unstable investment-team culture. The firm's lineup has been durable. It has had a five-year risk-adjusted success ratio of 100%, meaning that of the strategies with a five-year track record, 100% have both survived and beaten their respective category median on a risk-adjusted basis. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. The firm charges fees on its open-end and exchange-traded funds that are on par with category peers. On average, fees on its funds are within the middle quintile, giving it neither an advantage nor disadvantage compared with the competition.

Parent

Applied Finance Valuation ETF

VSLU is an actively managed fund the selects at least 200 stocks globally based on a proprietary valuation driven investment process.

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