ETF Trends
ETF Trends

The Validea Market Legends ETF (NasdaqGM: VALX), an actively managed exchange traded fund, that selects and scores stocks using proprietary models based on the approaches of famous investors such as Warren Buffett and Peter Lynch, is boosting its exposure to the healthcare sector.

Using impressive scores from the firm’s Peter Lynch model, Validea added to VALX stakes in Dow component Merck (NYSE: MRK) and biotech giants Gilead Sciences (NasdaqGS: GILD) and Celgene (NasdaqGS: CELG) .

As of May 14, Gilead represented 0.95% in VALX while the ETF allocated 0.91% to Celgene and 0.88% to Merck, according to issuer data. None of VALX’s 100 holdings command a weight north of 1.64%.

According to Justin Carbonneau, partner at the firm, the fund recently conducted its monthly rebalancing. On these rebalancing dates, approximately 1/10th of the portfolio (or 10 out of 100 holdings) is rebalanced once every 28 days. During each rebalancing, stocks that have fallen in score are replaced with higher-scoring securities. This monthly holding review process is different than many other ETFs, which may follow a quarterly or even less frequent rebalancing process. Carbonneau goes on to say that the rebalancings, which take place on a 28 day cycle, are a key part of disciplined investment process that goes into the fund and it allows the strategy to take into consideration the most recent fundamentals and price movements on stocks in an effort to find the best ideas in real-time,” according to Validea.

The actively managed ETF 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. [Apple Joins Legends ETF]

“Gilead scores highly based on multiple investment criteria, including favorable P/E/G ratio (a ratio that Lynch used to assess the valuation of a stock relative to its growth rate), strong earnings growth and an acceptable debt-to-equity ratio. The stock also receives high marks from additional growth and momentum strategies run by Validea Capital, which Carbonneau says is a bonus because stocks with high scores from multiple strategies indicates strong fundamentals through the lens of different approaches that all analyze many important facets of a company’s overall financial health and the attractiveness of its stock. According to Carbonneau, VALX’s 10 unique models that make up the fund utilize both value- and growth-based styles and the combination of these strategies seeks to reduce variability of returns over time, an important factor, he believes, that will contribute to the potential in maximizing long term investor returns,” according to Validea. [New ETF Tracks Legendary Investors, Strategies]

Validea Market Legends ETF