On this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth discussed the TCW Transform Supply Chain ETF (SUPP) with Chuck Jaffe of “Money Life.” The pair talked about several topics regarding the fund to give investors a deeper understanding of the ETF overall.
TCW Transform Supply Chain ETF (SUPP)
Chuck Jaffe: One fund on point for today. The experts to talk about it. This is the ETF of the Week. Yes. Welcome to the ETF of the Week, where we examine trending new, newsworthy, unique, and intriguing exchange traded funds with Todd Rosenbluth, head of research at VettaFi, where they’ve developed a suite of tools and research that’s going to help you be a savvier, smarter, and better investor in exchange traded funds.
Todd Rosenbluth is their head of research. Check him out @ToddRosenbluth on Twitter or X. Check out VettaFi at VettaFi.com. Todd Rosenbluth, great to chat with you again.
Todd Rosenbluth: Great to be with you again, Chuck.
Chuck Jaffe: Your ETF of the Week is?
Todd Rosenbluth: The TCW Transform Supply Chain ETF, ticker SUPP.
Chuck Jaffe: SUPP, the TCW Transform Supply Chain ETF. And this is a really interesting pick. But given that ticker symbol, there’s only one question. Todd, what’s up? Right?
Todd Rosenbluth: Yes, what’s up? That’s what my 13-year-old would say to me as he was walking in the door. S’up? SUPP is a thematic ETF, but it’s different than most of the thematic ETFs that are out there. Instead of focusing on technology, it’s focused more on industrial and materials companies that can benefit from a supply chain reshoring back into the United States.
So we have certainly seen it in the beginning of COVID and then in the last three years since COVID reemerged, and then pulled back a little bit. With how important it is for things to happen in North America and in particular the United States from an industrial standpoint, we think this is a really timely ETF. It’s relatively small, but it’s actively managed. There’s a strong team behind it. We want to dig in deeper.
Chuck Jaffe: So this is what people used to call a granular ETF, like how finely can we define things? And where do we want to drill down? When we’re talking supply chain, is this the shippers and the transport companies? Is this the logistics companies? I mean, how narrowly are they defining this? How granular are they getting?
Todd Rosenbluth: So because this is actively managed, the team has the ability to go where they think the supply chain opportunities are — so a company like CSX, which is obviously in the transportation space; Waste Connections is in the portfolio as well. Martin Marietta Materials is also in the portfolio. You can see a mixture of industrials and materials companies. Actually, Taiwan Semiconductor is also within this portfolio — one of the rarer technology stocks that you’d find.
But because, as I mentioned, it’s actively managed, that matters from both a valuation and a fundamental perspective, as well as identifying these future companies that can benefit from the trend.
Chuck Jaffe: You know, I asked the question, what’s up? And the other possible answer would be here, SUPP. The fund is up. The fund is killing it this year. So are we late to the party? I mean, it’s well above its 200-day moving average, but there comes a point where you get high enough that you think it’s got to go down from here. — the timing on this one with it being on a good run.
Todd Rosenbluth: I think the fundamentals are still strong for the supply chain trend and it’s still early days. What’s exciting is you’re right, this is not a technology-oriented ETF, and technology is what’s been leading the market. We still think that there’s room for longer-term growth. This is a longer-term thematic strategy. Turnover is relatively low.
The opportunities in this space are multiyear oriented, but yet there’s active management. So there’s obviously going to be valuations that need to be under consideration. And the management team that’s behind this is reviewing this on a regular basis.
In fact, we’re excited because we have an Equity Symposium taking place on March 13, and we’re going to hear from the portfolio manager, Eli Horton. And one of the questions I’m going to ask him is about valuation in this environment.
Chuck Jaffe: We saw during COVID and after COVID when we had the ship stuck in the Suez Canal and all those other things, how sensitive the supply chain is. Is there a worry, given that this is an actively managed fund, given how the market responds, that the next time a ship gets stuck in the Suez Canal or what have you, this fund takes it on the chin?
Todd Rosenbluth: Well, even though there is some global exposure, this is primarily focusing on companies that are moving things in toward the United States, and focusing on bringing things so that the supply chain is closer to home for U.S. businesses. And we certainly don’t want any tragedy to happen. We don’t want anything to be slowed down from a global supply chain perspective.
But the fact that this is focusing on North America in particular, and companies that are focusing on bringing things closer to home, that’s an opportunity for this to be on the radar for many investors if we get things in the news like you’re referencing.
Chuck Jaffe: Because this is a granular fund, if you and I are talking about something mainstream — a core equity fund, a growth fund of whatever — you can easily see how an investor would use it. But in this case, when we’re talking about a sector bet or a really narrow industry bet, how much of a portfolio do you want it to be, and where does the money come from?
Is this like, take some of your equity money, take a chance, and supercharge it with this kind of a sector player How would you expect people to use this fund?
Todd Rosenbluth: So at VettaFi, we often hear from advisors that are looking to have between 5% and 10% of their portfolio toward more a longer-term thematic strategy. So SUPP can complement a core index-based equity strategy tied to the S&P 500 or the Russell 1000. There are, of course, companies in this portfolio that you’d have within your market-cap-weighted index-based approach. But you can overweight some of these companies that are tied to the supply chain in the industrials and materials space.
And you can often pair this with something more technology-oriented, whether that’s artificial intelligence or cloud computing, or cybersecurity. Those are some of the themes people are more familiar with within the thematic ETF space. So this can be a good complement to an index-based strategy benefiting from the active management of TCW.
Chuck Jaffe: It’s SUPP, the TCW Transform Supply Chain ETF, and it’s the ETF of the week. A really interesting pick from Todd Rosenbluth. Todd, great stuff. I’ll see you again next week.
Todd Rosenbluth: See you next week, Chuck. S’up!
Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And I am Chuck Jaffe. If you want to learn about my hour-long weekday podcast, go check it out at MoneyLifeShow.com or on your favorite podcast app. And if you want to learn more about investing in exchange traded funds — and you wouldn’t be here if you didn’t — then go to VettaFi.com.
They’ve got a full suite of tools that will help you out and help you find great funds and ways to manage them better in your portfolio. They’re on Twitter or X @Vetta_Fi. Todd Rosenbluth, my guest, and their head of research, he’s on Twitter, too. He’s at @ToddRosenbluth. The ETF of the Week is here for you every Thursday. Subscribe on one of your favorite podcast apps to make sure you don’t miss one. Until next week, happy investing, everybody!
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