In recent years, an increasing number of so-called guru exchange traded funds have popped up, giving investors access to stock that frequently appear in the 13F filings of legendary investors and financiers such as Warren Buffett and Carl Icahn.
While of those ETFs have performed well and proven successful with investors, none directly give investors exposure to the methodologies used by some of Wall Street’s biggest names. The Validea Market Legends ETF (NasdaqGM: VALX), which debuted Wednesday, looks to change that.
The Validea Market Legends ETF is sponsored by Validea Capital Management, which manages nearly $670 million in assets.
Actively managed, VALX selects stocks “using Validea Capital’s proprietary investment system, which is based on our interpretation of the published investment strategies of Wall Street legends. In total, Validea Capital runs 17 different models and the Validea Market Legends ETF is comprised of 100 stocks using 10 distinct ‘guru’-based models that utilize a wide variety of investment styles, including value, growth, momentum and income,” according to the firm.
“Validea Capital believes that the best way to outperform the market is to learn from the select group of legendary investors who have done so historically,” said John Reese, CEO of Validea Capital and co-portfolio manager of the fund, in a statement. “For over ten years, Validea Capital has been running fundamental-based models using these legendary strategies and now the Validea Market Legends ETF provides an easy way for individual and professional investors to gain access to our unique stock selection approach.”
VALX is home to 100 stocks, none of which account for more than 1.05% of the ETF’s weight. Validea Capital employs sector and position limits in an effort to mitigate concentration risk and also uses a real-time stop-loss strategy to buffer the fund’s holdings from company-specific catastrophes.
“Validea Capital runs models based on legendary investors. In total, we 17 fundamentally based models based on the approaches outlined by Buffett, Graham, Neff, Lynch and many others. These investors, who have proven track records of outperformance or have long term back tests behind their strategies,” said Validea partner Justin Carbonneau in an interview with ETF Trends.
Holdings in the new ETF include Carbo Ceramics (NYSE: CRR), InSight Enterprises (NasdaqGS: NSIT), Cash America (NasdaqGS: CASH), Rex American Resources (NYSE: REX) and Yahoo (NasdaqGS: YHOO).
“On a 28 day cycle we review the holdings and stocks that are eligible for sale (i.e. stocks we have losses on and stocks that don’t score as highly according to the models) will be removed from the portfolio and replaced with higher scoring names. This equates to about 10% of the portfolio turning over each month,” said Carbonneau. “Generally speaking, this will be a midcap value strategy but the models are free to roam to find the best opportunities across all market caps and styles.”
“The combination of different types of investing strategies allows the fund to seek market outperformance, while still setting itself up to perform well in different types of market environments when different investing strategies are in favor. The systematic approach Validea Capital uses in stock selection and portfolio management removes emotions and biases, which often times plague both individual and professional investors and reduce returns from the investing process. The fund will do this by focusing exclusively on the fundamentals when selecting stocks and by employing a disciplined rebalancing approach to ensure that the highest scoring stocks according to the stock selection system remain in the portfolio over time,” according to the statement. [A Gorgeous Guru ETF]
VALX Charges 0.79% per year.
ETF Trends editorial team contributed to this post.