Forget Dividend ETFs, ‘Float-Shrink’ Buyback Fund Trouncing Market
August 20th 2013 at 9:59am by John Spence
Dividend exchange traded funds have raked in billions of dollars but an obscure, actively managed ETF that focuses on companies returning capital to investors via share buybacks is crushing the market this year.
AdvisorShares TrimTabs Float Shrink ETF (NYSEArca: TTFS) is up 26.6% year to date while the S&P 500 has posted a total return of 17%, according to Morningstar.
TTFS is a relatively small fund with nearly $56 million in assets. The ETF was launched in October 2011 so it will soon have a three-year track record that could attract more investors and financial advisors.
TTFS is sponsored by active ETF specialist AdvisorShares but is sub-advised by TrimTabs Asset Management, a unit of TrimTabs Investment Research. [‘Float-Shrink’ ETF Delivers Impressive Performance]
Noted market commentator and TrimTabs founder Charles Biderman is a co-portfolio manager for TTFS. His research is based on his belief that liquidity rather than fundamentals determine stock prices.
“My basic thesis is that if you follow supply and demand, it can actually determine future stock prices,” Biderman said in a telephone interview this week.
Biderman’s strategy at TTFS, which has an expense ratio of 0.99%, screens for companies that are shrinking their float, or the number of shares outstanding. The premise is that company insiders know more about the business and its prospects than the investing public.
Next page: ‘Supply and demand’