Best And Worst Q3 2019: Financials ETFs And Mutual Funds

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Includes: FSRBX, KBWB
by: David Trainer
Summary

The Financials sector ranks second in Q3 2019.

Based on an aggregation of ratings of the 433 stocks in the Financials sector.

KBWB is our top-rated Financials ETF and FSRBX is our top-rated Financials mutual fund.

The Financials sector ranks second out of the 11 sectors as detailed in our Q3'19 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Financials sector ranked first. It gets our Attractive rating, which is based on an aggregation of ratings of the 433 stocks in the Financials sector. See a recap of our Q2'19 Sector Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Financials sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 25 to 423). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Financials sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings.[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best and Worst Ratings

* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Figure 2: Mutual Funds with the Best & Worst Ratings

* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Two mutual funds (RYKIX, ICFSX) are excluded from Figure 2 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

KBWB is the top-rated Financials ETF and FSRBX is the top-rated Financials mutual fund. Both earn a Very Attractive rating.

KBWD is the worst rated Financials ETF and RYFNX is the worst rated Financials mutual fund. KBWD earns an Unattractive rating and RYFNX earns a Very Unattractive rating.

433 stocks of the 2,800-plus we cover are classified as Financials stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.

Performance of Holdings = Performance of Fund

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: Cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Financials ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

Disclosure: David Trainer, Peter Apockotos, and Kyle Guske receive no compensation to write about any specific stock, sector or theme.

[1] Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

[2] This paper compares our analytics on a mega cap company to other major providers. The Appendix details exactly how we stack up.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.