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.
Chaikin Power Gauge Factors
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.
Similarly, CSML tries to reflect the performance of the Nasdaq Chaikin Power US Small Cap Index, which applies a shareholder yield screen and the Chaikin Power Gauge to select components from the Nasdaq US 1500 Index.
Related: Multi-Factor ETFs: Great Long-Term Investments
“The Power Gauge is remarkably accurate at identifying stocks likely to outperform or underperform the market over the next three to six months. It conquers emotional trading decisions, cuts through the clutter, ends information overload, and gives you a reliable read on where a stock is headed,” according to Chaikin Analytics.
Financial advisors who are interested in learning more about multi-factor strategies can register for the Tuesday, June 26 webcast here.