So Far The Stock Split ETF Is Getting The Last Laugh

By | October 9, 2015

Scalper1 News

Summary Has Outperformed the S&P 500 Since Its Inception Last Autumn. Based On An Index That Began In 1996. Portfolio Features Multi Cap and Equally Weighted Names Updated Monthly. Introduction: A little over a year ago a new very different ETF came to market, the USCF Stock Split Index ETF (NYSEARCA: TOFR ). At first blush this idea for an ETF seemed somewhat preposterous, but upon reflection after a year and examining the index and methodology it may not seem as silly as some people have thought. It’s index is based on some solid back testing with well over a decade of data. Fund Highlights: The index for this fund is the 2 for 1 Index “SPLITS”, less fees and expenses. The expense ratio is 0.75%. The fund holds about 30 equally weighted mostly U.S. traded stocks that have recently split their stock within the last 6 months. The index and fund are rebalanced monthly with the oldest inclusion deleted and a new one added. According to the fact sheet : The pool of eligible companies is evaluated and ranked according to a proprietary methodology, and the top ranked choice is selected for the Index. This index is based on an investment newsletter that has been published since 1996. This newsletter, published by Neil Macneale, has data going back to 1996 when he first published the index. Macneale has calculated an annualized return of 10.75% versus 7.76% for an S&P 500 index fund. 2 for 1 Index Performance: Below is the 2 for 1 Index 10 Year performance chart from the 2 for 1 Index website. Holdings For The TOFR ETF: The holdings can be found here. They include some familiar and diverse names such as tech giant Apple (NASDAQ: AAPL ), water heater company A.O. Smith (NYSE: AOS ), railroad Canadian National Railway (NYSE: CNI ) industrial goods manufacturer PPG Industries (NYSE: PPG ), to name just a few. The fund holds about 80% domestic U.S. names and 20% foreign, with the largest amount in mid cap market capitalization names, but could be defined really as a multi cap fund. Portfolio metrics below from Morningstar. The Sector Breakdown Sector Summary Financial Services 20.37 Industrials 16.85 Consumer Cyclical 16.49 Utilities 10.61 Technology 9.91 Market Capitalization Breakdown: Market Capitalization Size % of Portfolio Giant 20.03 Large 13.09 Medium 35.9 Small 27.54 Micro 3.44 Fund Performance Since Inception (September 2014 to Present): (click to enlarge) Chart from Morningstar – includes the NAV and market price compared to S&P 500 since its mid September 2014 inception. The TOFR Stock Split fund has delivered some impressive results so far gaining over 5% versus around 1.4% for the S&P 500. The fund is lightly traded with only 4.8 million in AUM. Limit orders would be a wise approach if buying or selling this fund. If the fund continues to outperform then this fund should gain assets. Conclusions and Caveats: This fund may make a nice addition to a portfolios growth portion especially as the market settles down. After examining the funds documents, its performance, and index – this fund may be attractive but be advised it would likely have large draw downs in poor markets. That said, there appears to be a premium to the stock split phenomenon. Let’s hope this continues and is not eventually arbitraged away like many other off beat strategies. Always read prospectuses, fact sheets and other fund literature before investing. Use limit orders for lightly traded funds. Scalper1 News

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