Best And Worst Q4 2020: Large Cap Blend ETFs And Mutual Funds

Nov. 25, 2020 10:00 AM ETDNVYX, QARP, RECS, RYDAX, FMK, DUSA, EPS, QUAL, QUS, ESG, HLAL, ECOZ, SLADX, CFIMX, AUXIX, AUXFX, TRFAX, RYDHX, RYDKX

Summary

  • The Large Cap Blend style ranks second in Q4'20.
  • Based on an aggregation of ratings of 61 ETFs and 661 mutual funds in the Large Cap Blend style.
  • QARP is our top-rated Large Cap Blend style ETF, and DNVYX is our top-rated Large Cap Blend style mutual fund.
  • Looking for a helping hand in the market? Members of Value Investing 2.0 get exclusive ideas and guidance to navigate any climate. Get started today »

The Large Cap Blend style ranks second out of the twelve fund styles, as detailed in our Q4'20 Style Ratings for ETFs and Mutual Funds report. Last quarter, the Large Cap Blend style ranked third. It gets our Attractive rating, which is based on an aggregation of ratings of 61 ETFs and 661 mutual funds in the Large Cap Blend style. See a recap of our Q3'20 Style Ratings here.

Figures 1 and 2 show the 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 15 to 1900). 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.

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)

The Columbia Research Enhanced Core ETF (RECS) is excluded from Figure 1 because its 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

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

(Sources: New Constructs, LLC and company filings)

The Xtrackers Russell 1000 U.S. Quality at a Reasonable Price ETF (QARP) is the top-rated Large Cap Blend ETF, and the Davis New York Venture Fund (DNVYX) is the top-rated Large Cap Blend mutual fund. Both earn a Very Attractive rating.

The First Trust Mega Cap AlphaDEX Fund (FMK) is the worst-rated Large Cap Blend ETF, and the Dow Jones Industrial Average Fund (RYDAX) is the worst-rated Large Cap Blend mutual fund. FMK earns a Neutral rating and RYDAX earns an Unattractive rating.

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.

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. More of the biggest names in the financial industry (see NY Times article "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

(Sources: New Constructs, LLC and company filings)

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

(Sources: New Constructs, LLC and company filings)

This article originally published on October 22, 2020.

Disclosure: David Trainer, Kyle Guske II, and Matt Shuler receive no compensation to write about any specific stock, style, or theme.

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This article was written by

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New Constructs is an independent research technology firm that provides unrivaled insights into the fundamentals and valuation of private & public businesses. Combining human expertise with machine learning and NLP, the firm shines light into the dark corners (e.g. footnotes) of millions of financial filings and provides superior investment research. The firm's Robo-Analyst technology is the first-ever vertically integrated investment research platform: performing data collection, financial modeling and assigning investment ratings to over 10,000 securities - automatically. This new technology is research automation at its best according to:


   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.

New Constructs' clients include investors of all types from quant funds like GSAM who subscribe to proprietary data feeds, advisors and individuals who subscribe to our investment research directly through our website.


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.

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