The underlying index takes 45 to 65 components from the market cap-weighted Nasdaq US 300 and incorporates the so-called Chaikin Power Gauge that combines four primary factors, including value, growth, technical and sentiment.
The value factor includes screens like LT debt to equity ratio, price to book value, return on equity, price to sales ratio and free cash flow. Technical factors cover price trend, price trend rate of change, relative strength vs. market and volume trend. Growth factors include earnings growth, earnings surprise, earnings trend, projected P/E ratio and earnings consistency. Lastly, the sentiment factor screens for earnings estimate trend, short interest, insider activity, analyst ratings and industry relative strength.
“Our entire suite of NASDAQ Chaikin indices is built on a proprietary research process and provides the basis for differentiated exposures, a task to which I’ve dedicated my career,” Chaikin said.
The Chaikain Power Gauge helps merge the best of active and passive investment methodologies. The smart beta methodology incorporates many investment styles traditionally associated with active management but brings the strategy to market through a rules-based, passive index ETF.
“Looking at the elements in the power gauge, it really bridges the gap between active and passive,” Carlton Neel, Chief Operating Officer at Chaikin Analytics, told ETF Trends. “The power gauge does a good job of selecting securities with outperformance.”
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