Seeking Alpha

Michael A. Paciotti

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  • Just One ETF: Getting Back to Quality With Focus on Low Debt, High ROE [View article]
    Thanks for your comments. Your points of clarification are right on. Thanks again.
    Jan 14 10:43 AM | Likes Like |Link to Comment
  • Just One ETF: Getting Back to Quality With Focus on Low Debt, High ROE [View article]
    Hi...sorry for the delay in responding. I can't really comment on why Powershares decided to make a change. There can be a variety of reasons ranging from investment related to business related decisions. What I can say is that while most managers will use the "we invest in a portfolio of high quality names,” few actually mean it in a literal sense. There are only a handful of products that deliberately screen for quality and a few others that get there accidentally, as a byproduct of some other intention (i.e. rising dividends, mega cap etc.). Changes and rebalancing typically occur quarterly. If you are interested, email us at info@icm-invest.com and I can send you a copy of their index methodology otherwise I believe it’s available for download off of S&P's website. Hope this helps.
    Jan 14 10:41 AM | Likes Like |Link to Comment
  • Just One ETF: Getting Back to Quality With Focus on Low Debt, High ROE [View article]
    Not a problem. This was not an article but an interview conducted by Seeking Alpha. They asked us a series of questions to which we responded. The point of the column as I understand it is for those who have some experience building ETF portfolios to articulate an idea that can be implemented through ETFs by responding to the questions. In January 2005, while managing Guardian Life's proprietary investment advisory business, we launched a managed ETF program as a component of our corporate advisory platform. We've been managing ETF based portfolios since then using the same quantitative process we used to manage the effort at Guardian.
    In short, the point of the interview is to lay out a case for high financial quality equities. According to our model, this is a segment of the market that is extremely attractive from a valuation standpoint. By saying that high quality is between 1.5 and 2 standard deviations undervalued what this means to us is that from a statistical perspective the probability of quality getting even cheaper still is very low. The definition of a 2 standard deviation event is that the probability of the event or worse occurring is only 2.5%, hence why we feel it’s attractive. Said differently, high quality relative to junk has only been cheaper in 2.5% of instances historically. The 2nd reason relates to defensive characteristics that can be found in high quality ranked names. Typically, high quality tends to shine the brightest in down markets (relative to the market). This is demonstrated by having a lower semi-standard deviation (volatility below zero) than the market. In practice what this has meant is that when markets turn down historically high quality tends to decline by less and show less volatility around that average. Given that we view the broader market as being somewhat overvalued combined with the inexpensive nature of the high quality, we find it attractive.
    Dec 20 03:50 PM | Likes Like |Link to Comment
  • Just One ETF: Getting Back to Quality With Focus on Low Debt, High ROE [View article]
    A complete list of fund holdings can be found at:

    www.invescopowershares...

    The top 20 holdings are as follows:

    1.40% Expeditors International of Washington Inc.
    1.39% Omnicom Group Inc.
    1.39% Caterpillar Inc.
    1.38% McCormick & Co. Inc.
    1.37% Hormel Foods Corp.
    1.36% Danaher Corp.
    1.36% Ross Stores Inc.
    1.35% General Dynamics Corp.
    1.35% Exxon Mobil Corp.
    1.34% Automatic Data Processing Inc.
    1.34% C.H. Robinson Worldwide Inc.
    1.34% W.W. Grainger Inc.
    1.34% Coca-Cola Co.
    1.33% Walgreen Co.
    1.33% Sigma-Aldrich Corp.
    1.33% CVS Caremark Corp.
    1.32% Stryker Corp.
    1.32% Nike Inc. (Cl B)
    1.32% Family Dollar Stores Inc.
    1.31% Colgate-Palmolive Co.
    Dec 20 03:03 PM | Likes Like |Link to Comment
  • Just One ETF: Getting Back to Quality With Focus on Low Debt, High ROE [View article]
    rolonrolon, I'm sorry that you don't agree with or care for our article. I am happy to supply you with any background information on me personally or our firm. Everything that has been presented about us from an organizational perspective is factual. I encourage you to reach out to us if you are interested in more background information. Additionally, we are an SEC registered investment advisor. Most of what you see on our website is also recorded in our ADV.
    With regards to our research, we follow a quantitative approach to investing that is top down focused. I can’t offer much perspective on individual names since that is not our expertise. It is the top down valuation of asset classes and factor exposures where we feel that we have something to offer.
    Dec 20 02:57 PM | Likes Like |Link to Comment
  • Just One ETF: Getting Back to Quality With Focus on Low Debt, High ROE [View article]
    Both the Powershares High Quality ETF(PIV) as well as the Vanguard Dividend Achievers ETF(VIG) carry with them quality characteristics. By definition, S&P characterizes anything A rated or better using S&P's earnings and dividend rankings as high financial quality. VIG by contrast also arrives at a quality portfolio but does so in a different manner. They don't target quality directly as S&P does, but arrive there as a result of requiring a multiyear period of rising dividends. It is the characteristic of high quality that we find attractive. You can define quality in multiple ways. Typically these companies possess low debt and high/sustainable ROE. We chose to define quality using S&P earnings and dividend rankings of A or better. Either way will work. Standard and Poors publishes a research piece called Quality Trends. They've done so periodically throughout the years, most recently just a few months ago. Our research is consistent with their findings.
    Dec 20 02:49 PM | Likes Like |Link to Comment
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