Investment Style Rankings For ETFs And Mutual Funds By Style And Size

Nov. 02, 2012 5:58 AM ETCLNE, KO, PEP2 Comments
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David Trainer

None of the fund styles earn a rating better than Neutral. See Figure 1 for my rankings on all twelve investment styles. My style ratings are based on the aggregation of my fund ratings for every ETF and mutual fund in each style.

Only one style, Large Cap Blend, contains any funds that earn a Very Attractive rating. Figures 4 and 5 provide details. The primary driver behind a Very Attractive fund rating is good portfolio management, or good stock picking, with low total annual costs.

Note that the Attractive-or-better Predictive ratings do not always correlate with Attractive-or-better total annual costs. This fact underscores that (1) low fees can dupe investors and (2) investors should invest only in funds with good stocks and low fees.

See Figures 4 through 13 for a detailed breakdown of ratings distributions by investment style. See my free ETF & mutual fund screener for rankings, ratings and free reports on 7000+ mutual funds and 400+ ETFs. My fund rating methodology is detailed here.

Prior reports on the best & worst ETFs and mutual funds in every sector and investment style are available here.

Figure 1: Ratings For All Investment Styles

Source: New Constructs, LLC and company filings

To earn an Attractive-or-better Predictive Rating, an ETF or mutual fund must have high-quality holdings and low costs. Only 172 style ETFs and mutual funds meet these requirements, which is only 4% of all style ETFs and mutual funds.

GMO Trust: GMO Quality Fund (GQLOX) is my top Style mutual fund. It gets my Very Attractive rating by allocating over 57.9% of its value to Attractive-or-better-rated stocks.

The Coca-Cola Company (KO) is one of my favorite stocks held by GQLOX. KO earns my Attractive rating due to its 14.7% ROIC and low valuation (price-to-economic

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