Summary
ETF has changed hands. Here is the new profile of the fund:
Invests in 100 US securities that are potentially undervalued activist and takeover targets.
Although this is an index-tracking fund, the index itself has a very active methodology, especially in the analysis of each component's financial statements and management discussion.
Investment Merit
Investing in value stocks has had a long and mixed tradition of success, but past performance is not an indicator of future performance.
Commercial Appeal
Tobias Carlisle, founder of the the index, appears to be a confident investment advice seller, so an ETF with his brand and name on it will motivate him to make the conference rounds more rigorously. Invoking Buffett always piques ears, and investors are always keen for a good deal or bargain. The expense ratio is a bit on the high side given it's an "index fund", albeit with a very active methodology.
Feasibility
It's just a basket of 100 US securities, although small caps, so very feasible operationally. The quarterly rebalances might be a bit hectic if they clash with the Russell 2000 rebalance, raising operational costs.
ETF Name: Roundhill Acquirers Deep Value ETF
Ticker: DEEP
Expense Ratio: 0.80%
Index/investment strategy: Acquirers Deep Value Index developed by Acquirers Funds LLC / Tobias Carlisle and calculated by Solactive - index page here. Uses the "Acquirer's Multiple"
The Acquirer’s Multiple: buying “fair companies at wonderful prices” instead of Buffett’s “wonderful companies at a fair price” strategy
The Acquirer’s Multiple compares the total cost of a business to its operating income or enterprise value divided by operating earnings.
Enterprise Value = market cap plus debt plus preferred stock plus minority interest minus cash.
Operating Earnings = revenue minus the cost of goods sold minus administrative costs minus depreciation/amortization.
Adviser: Exchange Traded Concepts, LLC
Investment Process
It first defines its universe as the smallest 75% of US stocks based on market cap and liquidity thresholds
.
Assets, earnings, and cash flows are examined according the index methodology.
Each stock then ranked.
Further evaluation using statistical measures of fraud, earnings manipulation, and financial distress.
Margin of safety then determined
a) wide discount to conservative valuation
b) strong, liquid balance sheet
c) robust business capable of generating free cash flows
Financial due diligence is performed according to index methodology with respect to company's financial statements, management's discussion and analysis.
www.roundhillinvestments.com/etf/deep
S000046243
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