Motley Fool Asset Management announced in a press release the launch of two new index-based ETFs on December 31, 2021. The funds, the Motley Fool Capital Efficiency 100 Index ETF (TMFE) and the Motley Fool Next Index ETF (TMFX) both track indexes that pull from the Motley Fool recommendation universe of securities.
“We established these ETFs with investor demand in mind,” said Kelsey Mowrey, president of Motley Fool Asset Management in the press release. “Both ETFs are designed to be convenient, cost-effective vehicles for individuals who want exposure to stock recommendations made by Motley Fool analysts across Fooldom.”
Mowrey went on to explain that the recommendation universe that the new Motley Fool ETFs pull from is comprised of companies within the U.S. that are either among the top 150 ranking of U.S. companies rated within the Motley Fool analysts’ database or were actively recommended in a Motley Fool newsletter.
The Motley Fool Capital Efficiency 100 Index ETF (TMFE) seeks to track the Capital Efficiency 100 Index, a rules-based index that tracks the performance of the highest-scoring U.S. companies based on their capital efficiency, a measurement of a business’ ability to convert investments into revenue and profit. By measuring this metric, analysts are able to better understand a company’s return on invested capital.
Weighting within the index is determined by multiplying the company’s share of the aggregate market value of all the companies in the index by the company’s capital efficiency score, with a max weighting of 5%. The capital efficiency score takes into account growth, profitability, and stability metrics, with the top 100 scoring stocks selected based on the index’s continuity rules.
The fund can contain securities of any market cap and can also seek to increase its income by lending securities.
The Motley Fool Next Index ETF (TMFX) seeks to track the Next Index, a rules-based index that tracks the performance of small- and mid-cap U.S. companies within the recommended universe. Securities included must meet the requirements of the Motley Fool 100 index, a proprietary, rules-based index that tracks the 100 biggest, most liquid U.S. companies within the recommended universe.
The Next Index excludes the 100 largest securities within the Motley Fool 100 index and can contain companies of any market cap, but is generally mostly comprised of mid- and small-cap securities. Weighting within the index is determined by the company’s share of the aggregate market value of all companies within the Next Index.
The fund may seek to increase its income by lending securities.
Both funds carry an expense ratio of 0.50% and follow the recent conversion of two of Motel Fool Asset Management’s mutual funds to ETFs earlier in December.
“These new ETFs, along with our existing Motley Fool 100 Index ETF, are uniquely passive implementations of The Motley Fool’s active stock recommendations,” said Mowrey in the press release. “Motley Fool Asset Management is ready to build on is current product line-up by offering these types of new products to investors.”
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