The underlying index will also focus on spin-offs, or issuers must have been spun-off from their parent companies in the past 12 to 84 months. Additionally, they must have experienced positive earnings and net income during the trailing 12-month period preceding the index’s rebalancing, with a market cap of over $500 million. Securities are ranked by how recently they were spun-off.
“Usually when a company is spun out from a large parent, its management team comes from the parent,” Dhando Funds said. “They have a say in when it is spun out, how much cash it has, what their incentives are etc. Typically Spin-Offs have robust balance sheets with strongly incented management.”
Lastly, to qualify for the value manager holdings category, issuers have to be held by one of twenty-two selected value hedge funds, like David Einhorn, Lou Simpson and Jeff Ubben. Positions are ranked by hedge funds and by largest positions to smallest positions held by the hedge funds.
The underlying index currently has a target exposure of 75% share buybacks, 20% select value manager holdings and 25% spin-offs. Due to its indexing methodology, the fund will likely have a value tilt.
Top holdings include AutoZone (NYSE: AZO) 17.1%, Anthem (NYSE: ANTM) 16.7%, The Travelers Cos (NYSE: TRV) 12.8%, Six Flags Entertainment Corp (NYSE: SIX) 3.7% and American International Group (NYSE: AIG) 3.5%.