At a time when growth stocks continue dominating value rivals, investors may want to consider unique exposures to the former, including the Entrepreneur 30 Fund (NYSEArca: ENTR).
The Entrepreneur 30 Fund tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria, referred to as entrepreneurial standards.
Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms.
“We incorporate a proprietary investment model which applies a global, bottom-up filtering process. Our 15 ‘entrepreneur’ factors utilize both qualitative and quantitative criteria,” according to EntrepeneurShares. “We apply our criteria to identify publicly traded entrepreneurial companies. History has shown that our model is effective across different market caps and geographical locations. We focus on management and leadership.”
ENTR: Weeding Out the Poorly Managed and Unsustainable
A primary advantage of ENTR when it comes to accessing growth names is that it takes a more meaningful approach than standard cap-weighted funds in this category.
The factors screened include management, which requires set factors regarding a company’s management must be met for a company to be included, such as the turnover among the top five executives within a company as compared to other companies in the broader universe must be met.
Profitability and revenue are also screened to weed out companies that may be growing rapidly at the expense of financial foundations.
Growth stocks may be seen as exorbitant and overvalued, causing some investors to favor value stocks, which are considered undervalued by the market. Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales). While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain priced compared with their competitors.
In fact, ENTR amplifies growth. The technology and consumer cyclical sectors are usually staples in standard growth ETFs, but those groups combine for almost 80% of ENTR’s roster. That’s overweight relative to traditional rivals.
For more investing ideas, visit our Entrepreneur ETF Channel.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.