Growth stocks are suddenly on sale, and with that scenario comes opportunity for investors to embrace entrepreneurial companies at discounts. There’s an ETF for that: the ERShares Entrepreneurs ETF (ENTR).
ENTR 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. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).
History proves there are compelling reasons to invest in fashion similar to ENTR, or better yet, own the fund itself.
“Entrepreneurial stocks substantially outperform broad market indexes in most years over the sample period. This finding is robust to segmentation by market capitalization (see the first chart below), sector and geography,” according to CXO Advisory.
ENTR’s Recipe for Success
Many entrepreneurial firms are concentrated in the consumer discretionary and technology sectors, cementing ENTR’s growth feel.
ENTR also includes sophisticated screens to weed out undesirable companies. The factors screened include management, which requires set factors regarding a company’s management, such as the turnover among the top five executives within a company compared to other companies in the broader universe. A profitability screen requires a company to meet predetermined criteria regarding net income over a static threshold to be included, including the company’s net income as compared to predetermined benchmarks.
“Entrepreneurial stocks outperform the broad stock market (and indexes for relevant size segments) in most years, but do not completely defy bear markets,” notes CXO.
There has been a significant shift in how companies conduct business over the last year, with many corporations transitioning their employees to the home as more stringent regulations become commonplace. With this shift comes a need for innovation, with companies like Ring, Crowdstrike, Tesla, and Fiverr embracing an entrepreneurial mindset. Investors looking to get in on the action can look to ERShares.
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.