Colin Anderson Productions pty ltd
Investment Thesis
This article marks my second review of the SMI 3Fourteen Full-Cycle Trend ETF (NASDAQ:FCTE). To summarize my initial coverage, FCTE is a highly active and highly concentrated large-cap ETF led
FCTE: Valuation Is Up, Growth Is Down, And Earnings Momentum Has Collapsed
Summary
- SMI 3Fourteen Full-Cycle Trend ETF takes a proprietary "Full Cycle Trend" approach to select 20 U.S. stocks based on quality, trend, and momentum screens, among others. Its expense ratio is high at 0.85%.
- My initial coverage from October was reasonably positive, though I maintained a healthy degree of skepticism, as is appropriate for such a new and highly active ETF.
- I was prepared for high turnover, but what I wasn't expecting was such a dramatic change in portfolio fundamentals. Unfortunately, most of the changes were negative.
- FCTE's forward P/E ratio of 24.81x is more than three points higher than its prior portfolio from October. Its estimated sales and earnings per share growth also declined by 2-3%.
- Earnings momentum also collapsed, though the fund is overweight insurance brokers, albeit likely temporary. Overall, I'm more skeptical than before and suggest readers be cautious with FCTE.
The Sunday Investor has completed all the educational requirements for the Chartered Investment Manager designation and is on track to become a licensed options and derivatives trading advisor. Focusing on U.S. Equity ETFs, The Sunday Investor maintains a comprehensive ETF Database that tracks the performance and fundamentals for nearly 1,000 funds. He is active in the comments section and ready to answer questions about any ETF you might considering.
Analyst’s Disclosure:I/we have a beneficial long position in the shares of SPY, KBWP either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.