It’s been a complicated year so far for growth investing. On the one hand, value mavens entering 2023 likely did not expect growth to prove so resilient. On the other, however, growth investing has perhaps proved too reliant on just a few firms, adding concentration risk. It’s apparent that a growthier investing view has a positive case right now, but it may need a helpful spin. The active growth ETF LGRO may provide an intriguing option, with some appealing firms to balance its big tech allocation.
LGRO, the Level Four Large Cap Growth Active ETF, launched just this year but has already gathered $57.5 million in AUM. Charging 55 basis points (bps), LGRO looks for maximum total return and above-peer average risk-adjusted return within U.S. large caps.
The active growth ETF starts with quantitative screens before applying fundamental analysis, looking at earnings potential, value, and growth opportunities. It aims for large, seasoned firms expected to grow in value via competitive advantage or efficient investment.
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That approach has led LGRO to hold the likes of Amazon (AMZN) and its mega-cap tech peers in its top holdings, yes, but it also holds some other large caps worth watching. LGRO, for example, weighs the Lam Research Corporation (LRCX) at 2.6%, its fifth-largest holding by weight.
Three Stocks in Active Growth ETF LGRO
LRCX manufactures equipment for semiconductor construction. Specifically, it focuses on the etch, deposition, and clean processes in making semiconductors. The clients who purchase those flagship products include big names like Samsung (005930) and Taiwan Semiconductor (TSM). LRCX has seen a robust 58.4% return on equity YTD, as well, per YCharts.
LGRO also holds, interestingly, BlackRock (BLK). BlackRock of course stands out as one of the biggest names in finance with its own ETFs and $9.4 trillion in AUM. The mega finance firm has produced a 13.8% return on equity and presents a nice source of diversification for LGRO vs. the tech names, weighted at 2.3%.
Finally, the active growth ETF LGRO holds Uber Technologies (UBER). Having once focused almost exclusively on transportation, UBER has diversified into having its drivers deliver food, for example, via its platform. While the stock hasn’t offered as positive a return on equity as desired YTD, it has seen 32.1% revenue growth over the last five years.
Taken together, those firms present intriguing additions to the tech names that have led the way this year in the market. For those looking for an active strategy that can move nimbly across opportunities, LGRO may be one to watch.
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