Motley Fool 100 ETF Results: Second Quarter 2018
|As of June 30, 2018||Second Quarter 2018||Since Inception (Inception Date: 1/30/2018)|
|Motley Fool 100 ETF (TMFC) NAV Return||7.06%||0.56%|
|Motley Fool 100 ETF (TMFC) Market Price Return||7.01%||0.70%|
|S&P 500 Index Return||3.43%||-3.91%|
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.
With all the volatility in the markets since the inception of the Motley Fool 100 ETF in late January, a return of 7.06% last quarter feels pretty good. It is certainly better than the 3.43% return from the S&P 500 in that same time, and it’s a big improvement from the negative returns in the first few months of the ETF’s existence. In fact, the S&P 500 is still in negative territory since we launched the ETF, and our fund has only recently fully recouped those early losses. Regardless, we prefer to focus on investing for the long term and don’t believe most investors should pay much heed to such short-term performance. Focusing on long-term investing also makes the market’s volatility far less troublesome.
Returns for the quarter were helped along by the relative outperformance of the technology sector, where the Fool 100 Index is still heavily overweight. The best performers for the quarter included Twitter (+51%), Align Technology (+36%), and Netflix (+33%). Fellow technology-focused companies Facebook, Square, Tesla, and VMware each gained at least 20% during the quarter as well. At the other end of the list, we saw negative returns from several companies including Cummins (-17%), Starbucks (-15%), and Celgene (-11%).
It can be difficult for individual investors to find the right balance between ignoring short-term market gyrations and paying attention to changing fortunes at the companies in which you’ve invested. That’s one of the benefits of following a market cap-weighted index approach like the Fool 100 Index. The analysts at our sister company, The Motley Fool LLC, are constantly updating their company rankings through the Fool IQ database. But the changes to the index are less frequent, only occurring once a quarter. And since the weight within the index is driven by each company’s market cap, the Index follows a simple approach that reduces the damages that can be caused by having excessive fear or greed at precisely the wrong time.
There were numerous changes to the Index at the end of this quarter, including a few changes among the largest positions and many more companies rotating out of the bottom of the list. A total of 20 companies were removed and 20 new businesses added during the most recent rebalance in late June. While that sounds like (and is) a large number of companies, it represented about 10% of the value of the index. And more than two-thirds of that total came from just three new additions including two big banks, JPMorgan Chase and Bank of America, plus semiconductor designer Broadcom. The Fool’s analysts were attracted to the banks thanks to a combination of lower relative valuations and the potential earnings boost that may come in a rising interest rate environment. These banks each entered the market-cap-weighted index among the 10 largest positions, while Broadcom entered just outside the top 20.
The other companies added to the index were: ABIOMED, American Airlines, BioMarin Pharmaceutical, CoStar Group, Discovery, Lam Research, McCormick & Co., Nasdaq, ResMed, Southwest Airlines, Splunk, SVB Financial Group, Take-Two Interactive Software, Textron, Transdigm Group, Ulta Beauty, and XPO Logistics. They replace: Automatic Data Processing, Baxter International, Charles Schwab, Cisco Systems, Discover Financial Services, Dominion Energy, Enterprise Products Partners, Express Scripts, Global Payments, Intel, IQVIA Holdings, Omnicom Group, ONEOK, Republic Services, Spectra Energy Partners, Synchrony Financial, Time Warner (which was acquired by AT&T during the quarter), Verizon Communications, Welltower, and WestRock. Among these, Intel, Verizon, and Cisco Systems had all previously been among the 15 largest companies in the index.
As always, the Fool 100 Index and Fool 100 ETF remain an easy way to track the Foolish style of investing across a basket of large-cap stocks. 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.