Motley Fool 100 ETF Results: March 2018

Tony Arsta
By Tony Arsta, Portfolio Manager
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Performance Through March 31, 2018
As of 3/31/2018 March Since Inception (Inception Date: 1/30/2018)
Motley Fool 100 ETF (TMFC) NAV Return -3.61% -6.07%
Motley Fool 100 ETF (TMFC) Market Price Return -3.68% -5.90%
S&P 500 Index Return -2.54% -7.10%


Gross Expense Ratio 0.50%. The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. The investment return and principal of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. For performance as of the most recent month end, please call 1-800-617-0004. Short term performance, in particular, is not a good indication of a fund's future performance, and investments should not be made based solely on returns.

Commentary:

The Motley Fool 100 ETF is two months old now, and the second month’s performance wasn’t any better than the first. The good news is that the ETF is beating the S&P 500 since inception, but the bad news is that it has a negative return. Still, we prefer to focus on the long term, and two months of market oscillations will soon fade from your memory; the trick is to stay invested and let the long-term appreciation of the market work for you.

Most companies in the index declined in value for the month, but there were a few winners. Payment company Square gained 6.8%, and data center landlord Equinix gained 6.6%. Intel, Markel, Ecolab, and Expedia all gained at least 5% as well. On the negative side of the ledger, there were far too many companies to name -- 26 of the companies in the Fool 100 Index declined at least -5% for the month. The worst of these had negative headlines accompanying the decline. Facebook dropped -10.4% for the month, while Tesla fell by a whopping -22.4%. Facebook’s decline came on the heels of revelations about user data being improperly collected and misused. Meanwhile Tesla experienced a series of negative events, including a credit rating downgrade, car recalls, rumors of production delays, and news of a fatal accident reportedly involving Tesla’s “Autopilot” feature. But since the index is market-cap weighted, the usual suspects once again had the biggest impact on overall performance: Apple was the most impactful holding with its -5.8% decline, followed by Facebook (-10.4%), Alphabet (-6.6%), and Amazon.com (-4.3%).

The Motley Fool 100 Index is rebalanced quarterly. Four times a year, our sister company, The Motley Fool LLC,  looks at its database of analyst-recommended stocks and adjusts the index to reflect current thinking. They delete any companies that are no longer recommendations, add the new picks, and re-sort everything by market cap to create a new but very similar list of companies for the Motley Fool 100 Index. As a result of this adjustment, at the end of March, six companies were replaced.

Commercial truck manufacturer Paccar and industrial engineering company Emerson Electric were removed from the eligible universe after Motley Fool analysts issued sell recommendations on the stocks. Meanwhile, biotech BioMarin Pharmaceutical, aerospace manufacturers Textron and Transdigm, and oil pipeline company Magellan Midstream all dropped out of the 100 largest recommendations at the time of index reconstitution.

These six companies were replaced by three new Motley Fool recommendations and three companies that simply grew large enough to enter the top 100. Open-source tech giant Red Hat, consumer finance lender Discover Financial Services, and pipeline operator Spectra Energy were each recently recommended by Motley Fool analysts. Veterinary healthcare company IDEXX Laboratories, cyber-security specialist Palo Alto Networks, and paper and packaging purveyor WestRock each grew just enough to reach the bottom of the list of our 100 largest ideas.

In all, the investments of the newly reconstituted index haven’t changed much. We’ll repeat the whole process in another three months; until then, the holdings will remain the same, barring any mergers or other corporate events. And remember, you can always see the full list of holdings in the ETF, updated daily, at www.fool100etf.com/holdings.

Note: Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice.

*The Motley Fool 100 index is a market-cap weighted index that measures the performance of The Motley Fool’s 100 largest active buy recommendations or highest-rated stocks in Fool IQ, the company's analyst opinion database. Every company included in the Index is incorporated and listed in the U.S. The S&P 500 Index  is a stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. You cannot invest directly in an index. 


Disclosures

*Holdings are subject to change. Holdings and percent of assets are based on security assets only, not including cash or receiveables (unpaid interest and dividends).

Please consider the charges, risks, expenses, and investment objectives carefully before you invest. Please see the prospectuses for the Motley Fool 100 Index ETF (the “Fund”) containing this and other information. Read it carefully before you invest or send money.

The investment advisor for the Fund is Motley Fool Asset Management, LLC (“MFAM”). Shares of the Fund are distributed by Quasar Distributors, LLC, a registered broker-dealer not affiliated with The Motley Fool.

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Investing involves risk, including possible loss of principal. To the extent the Fund invests more heavily in particular sectors of the economy (e.g., technology), its performance will be especially sensitive to developments that significantly affect those sectors. Similarly, the Fund is non-diversified, which means that it may invest a high percentage of its assets in a limited number of securities and, as a result, gains or losses on a single stock may have a greater impact on the Fund.

In addition to normal risks associated with investing in equity securities, investments in the Fund are subject to those risks specific to ETFs. Unlike other funds managed by MFAM, the Fund is not actively managed and we do not attempt to take defensive positions in any market conditions, including adverse markets. Likewise, we would not sell shares due to current or projected underperformance of a security, industry, or sector, unless that security is removed from the Index or the selling of shares of that security is otherwise required upon a reconstitution of the Index. As with all index funds, the performance of the Fund and its Index may differ from each other for a variety of reasons, including the operating expenses and portfolio transaction costs not incurred by the Index. In addition, the Fund may not be fully invested in the securities of the Index at all times, or may hold securities not included in the Index. Finally, Fund shares may trade at a material discount to NAV, and this risk is heightened in times of market volatility or periods of steep market declines.

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