The Large-Cap Value style ranks second out of the 12 fund styles as detailed in our Q4'19 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Large-Cap Value style ranked third. It gets our Attractive rating, which is based on an aggregation of ratings of 67 ETFs and 883 mutual funds in the Large-Cap Value 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 Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 14 to 1,198). This variation creates drastically different investment implications and, therefore, ratings.
Investors seeking exposure to the Large-Cap Value 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. 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
Columbia Sustainable U.S. Equity Income ETF (ESGS), Global X S&P 500 Quality Dividend ETF (QDIV), American Century STOXX U.S. Quality Value ETF (VALQ), and FlexShares Quality Dividend Dynamic Index Fund (QDYN) 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
Stock Dividend Fund (SDIVX) is excluded from Figure 2 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.
First Trust Rising Dividend Achievers ETF (RDVY) is the top-rated Large Cap Value ETF and Legg Mason Brandywine Global Diversified U.S. Large Cap Value Fund (LBISX) is the top-rated Large Cap Value mutual fund. Both earn a Very Attractive rating.
Invesco S&P High Dividend Low Volatility ETF (XSHD) is the worst rated Large-Cap Value ETF and Rational Dividend Capture Fund (HDCAX) is the worst rated Large Cap Value mutual fund. XSHD earns an Unattractive rating and HDCAX 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 Value 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.
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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. 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.