etf research a fundamentally different overview approach to etfs
TRANSCRIPT
A fundamentally different approach to ETFs
ETF Research Overview
Presented by:Michael KrausePresident, AltaVista Research
Note: Unless otherwise indicated, the source for all figures contained herein is AltaVista Research, LLC. © 2010 All rights reserved.
Agenda
The Source for Fundamental ETF Analysis
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Problem: choices, choices Research marketplace AltaVista’s approach
Explanation Advantages & Uses
Q&A
The Source for Fundamental ETF Analysis
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Problem: Choices, choices
Which ETFs are right for me? Limited history Competing claims & information What’s in a name?
“It’s an index-picker’s market” Index as investment, not benchmark Increased burden on advisors Active allocation required
Research marketplace
The Source for Fundamental ETF Analysis
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Type Mutual fund approach Portfolio Strategy Industry reporting
Practitioners Morningstar, Lipper, etc.
Wire houses, some blogs
Financial press, blogs, fund issuers, wire houses
Content Past performance analysis
Implementation of given strategy w/ ETFs
Product awareness, trend following
Drawbacks Backwards-looking, useless with new funds
Subjective, based on strategist’s conclusion
Not investment research
AltaVista’s approach
The Source for Fundamental ETF Analysis
Problem: Warmed-over mutual fund approach focuses on the past, and answers the wrong questions
Solution: Apply traditional tools of security analysis to fund constituents
Benefit: Forward-looking view of an ETF’s investment merit -Graham & Dodd, 1934
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A fundamentally different approach to ETFs…
AltaVista’s approach
The Source for Fundamental ETF Analysis
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Sales, earnings, dividends, etc., both historical and forecast
Balance sheet ratios Trends in estimate revisions Valuation metrics & ALTAR
Score™ investment rating
-Page from ETF Analyzer
In addition to the basics, for every ETF we calculate:
Advantages
The Source for Fundamental ETF Analysis
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Forward-looking Objective & familiar Strategy agnostic Dynamically updated Applicable to new funds
ETF Research Center
The Source for Fundamental ETF Analysis
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www.etfresearchcenter.com
Fund detail Fund search Portfolio builder Hedge finder
A complete toolbox…
Offline research
The Source for Fundamental ETF Analysis
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ETF Advisor newsletter (monthly) ETF Analyzer guidebook Direct data feed
The Source for Fundamental ETF Analysis
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The end
www.altavista-research.com www.etfresearchcenter.com
A fundamentally different approach to ETFs
For more information please visit…
The Source for Fundamental ETF Analysis
ALTAR Score™
AltaVista Long Term Annual ReturnWhat it is:
Broad measure of investment meritBuffet-style ownership approachAvg. ROE ÷ P/BV less fees
What it does:Provides relative view of valueAllows pan-cyclical comparisons
What it is not:Prediction of near-term price movementsThe final word in ETF selection
ALTAR Score™
feesBVPROE
FYavg −÷
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Illustration
Firm A: 10% ROE, P/BV = 2.0x
if BV = $1,000
Profits = $100 (10% x $1,000)
My investment = $2,000 (2.0x BV)
My return = 5% ($100 ÷ $2,000)
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A P P E ND I X
The Source for Fundamental ETF Analysis
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Fighting the last war
Warmed-over mutual fund approach Focused on past performance & fees Evaluates the PM Long-biased
Shortcomings Backwards looking Answers the wrong questions Can’t be done with new funds It’s all relative
FXI: Price & rating history
$0$10$20$30$40$50$60$70$80
2004 2005 2006 2007 2008 2009
A P P E ND I X