Warren Buffett, the billionaire investor next door, once said, “Be fearful when others are greedy and greedy when others are fearful.” A new exchange traded fund (ETF) will make that job a bit easier for contrarian investors.
The JETS Contrarian Opportunities Index Fund (NYSEArca: JCO) is a new and first-of-its kind product that tracks stocks that are currently out of favor with investors, reports Olivier Ludwig of Index Universe. Javelin Investment Management, famous for its JETS Dow Jones Islamic Market International Index Fund (NYSEArca: JVS), created the fund.
“About 30% of the portfolio is currently invested in the consumer services industry, 21% in health care, and almost 15% in industrials,“ according Olivier Ludwig.
The fund, which is based on the Dow Jones U.S. Contrarian Opportunities Index, is designed to invest in those stocks that have underperformed in recent years, but have strong fundamentals relative to other companies. Stocks are chosen semiannually based on three-year trailing returns.
Caution, though: the fund, by its nature, will have a high portfolio turnover, which may increase transaction and taxation expenses.
However, Javelin’s President Brint Frith, is confident that the performance of the fund will more than offset the added expenses. He claims, “While there should be some additional tax burdens based on those capital gains, they should be more than offset by the performance of the fund.”
For more stories on new ETFs, visit our new ETFs category.
Sumin Kim contributed to this article.