When weighting components, the Cornerstone team will select stocks based on three criteria: Analysts have positively revised their forward looking estimates of the company’s profitability and the company has generated earnings in excess of analyst expectations. Balance sheet strength. Lastly, financial flexibility, as determined by measuring a company’s ability to meet debt and capital expenditure requirements.
“The Sub-Advisor’s investment philosophy is based on the view that the market often misprices fundamental improvements and is slow to recognize improving fundamentals, particularly in small cap stocks,” according to the prospectus.
SCAP will be competing against two other actively managed small-cap ETFs in the space, the AlphaMark Actively Managed Small Cap ETF (NasdaqGM: SMCP) and iShares Enhanced U.S. Small-Cap ETF (NYSEArca: IESM).
For more information on new fund products, visit our new ETFs category.