The Large-Cap Blend style ranks first out of the twelve fund styles as detailed in our Q4'19 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Large-Cap Blend style ranked first as well. It gets our Very Attractive rating, which is based on an aggregation of ratings of 65 ETFs and 698 mutual funds in the Large-Cap Blend style. See a recap of our Q3'19 Style Ratings here.
Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all Large-Cap Blend style ETFs and mutual funds are created the same. The number of holdings varies widely (from 20 to 1510). This variation creates drastically different investment implications and, therefore, ratings.
Investors seeking exposure to the Large-Cap Blend style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.
Our Robo-Analyst technology empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings. Only our research utilizes the superior data and earnings adjustments featured by the HBS & MIT Sloan paper, “Core Earnings: New Data and Evidence.” 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 – Top 5
Sources: New Constructs, LLC and company filings
State Street SPDR MFS Systematic Core Equity ETF (SYE), Invesco S&P 100 Equal Weight ETF (EQWL), and First Trust Mega Cap AlphaDEX Fund (FMK) are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.
Figure 2: Mutual Funds with the Best and Worst Ratings – Top 5
Sources: New Constructs, LLC and company filings
FundVantage Gotham Large Fund (GVALX), ALPS Series Clarkston Fund (CILGX), and FundVantage Gotham Enhanced S&P 500 Index Fund (GSPFX) are excluded from Figure 2 because their total net assets ((TNA)) are below $100 million and do not meet our liquidity minimums.
Principal Sustainable Momentum Index (PMOM) is the worst rated Large Cap Blend ETF and Pacific Advisors Large Cap Fund (PAGTX) is the worst rated Large Cap Blend mutual fund. PMOM earns a Neutral rating and PAGTX earns a Very Unattractive rating.
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.
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 Large Cap Blend ETFs and mutual funds.
Figure 3: Separating the Best ETFs from the Worst Funds
Figure 4: Separating the Best Mutual Funds from the Worst Funds
This article originally published on October 23, 2019.
Disclosure: David Trainer, Kyle Guske II, and Sam McBride receive no compensation to write about any specific stock, style, or theme.
 Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.
 This paper compares our analytics on a mega cap company to other major providers. The Appendix details exactly how we stack up.
Get our long and short/warning ideas. Access to top accounting and finance experts.
1. Daily - long & short idea updates, forensic accounting insights, chat
2. Weekly - exclusive access to in-depth long & short ideas
3. Monthly - 40 large, 40 small cap ideas from the Most Attractive & Most Dangerous Stocks Model Portfolios
This paper compares our analytics on a mega cap company to other major providers. The Appendix details exactly how we stack up.
Harvard Business School featured our unique technological capabilities in “New Constructs: Disrupting Fundamental Analysis with Robo-Analysts”.
This article was written by
1. Harvard Business School & MIT Sloan prove our fundamental data is superior.
2. Ernst & Young proves the superiority of our financial analytics over Capital IQ & Bloomberg.
3. Indiana Kelly School of Business proves our stock ratings outperform human analysts.
If these prestigious institutions trust us so much that they decided to publish official papers to prove the superiority of our research, then you can safely trust us, too.
David is CEO of New Constructs (www.newconstructs.com). David is a distinguished investment strategist and corporate finance expert. He was a 5-yr member of FASB's Investors Advisory Committee. He is author of the Chapter “Modern Tools for Valuation” in The Valuation Handbook (Wiley Finance 2010).
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.