Motley Fool Asset Management, an affiliate of The Motley Fool private investor site, has expanded its ETF lineup with the launch of two new strategies.
Kelsey Mowrey, President of Motley Fool Asset Management.
Listed on NYSE Arca, the Fool Capital Efficiency 100 Index ETF (TMFE US) and Fool Next Index ETF (TMFX US) offer exposure to various stocks within The Motley Fool’s ‘recommendation universe’.
The Motley Fool recommendation universe includes all companies domiciled in the United States that are either active recommendations of a newsletter published by The Motley Fool or are among the 150 highest-rated US companies in The Motley Fool’s analyst opinion database.
The Fool Capital Efficiency 100 Index ETF is based on the proprietary Motley Fool Capital Efficiency 100 Index, tracking the performance of the highest-scoring stocks in the universe as ranked by capital efficiency.
Capital efficiency is a measure of how a business turns its investments into revenue and profit, and it provides insight into the company’s return on invested capital.
For each stock in the universe, Motley Fool calculates a Capital Efficiency Factor Score that incorporates growth, profitability, and stability metrics in assessing a company’s capital efficiency. The 100 highest-ranking stocks are selected to form the index, subject to buffer allowances to moderate portfolio turnover.
The 100 selected stocks are weighted by their market capitalization multiplied by their respective Capital Efficiency Factor Score, subject to a maximum position size limit of 5%. The index is reconstituted and rebalanced quarterly and may contain companies of any size capitalization. Top holdings presently include Home Depot (5.1%), Visa (5.1%), Apple (5.1%), Nvidia (5.1%) and Meta Platforms (5.0%).
The Fool Next Index ETF, based on the Motley Fool Next Index. It tracks the performance of mid- and small-capitalization companies in the Motley Fool recommendation universe. It essentially provides exposure to all companies in the universe that have a three-month average daily value traded of at least $1 million, excluding the 100 largest securities.
The index is weighted by market capitalization and typically includes between 150 and 450 companies at any one time. It is reconstituted and rebalanced quarterly. There are currently 197 holdings. Notable positions include Arista Networks (2.1%), The Trade Desk (2.0%) McKesson (1.8%), Cummins (1.6%) and Corning (1.6%).
Commenting on the new funds, Kelsey Mowrey, President of Motley Fool Asset Management, said: “Both ETFs are designed to be convenient, cost-effective vehicles for individuals who want exposure to stock recommendations made by Motley Fool analysts across Fooldom…We are thrilled to add these two index-based investment products to our ETF lineup.”
She added: “These new ETFs, along with our existing Motley Fool 100 Index ETF, are uniquely passive implementations of The Motley Fool’s active stock recommendations.”
The ETFs come with expense ratios of 0.50%.
They follow two Motley Fool mutual fund conversions in late 2021, which resulted in the creation of the Motley Fool Global Opportunities ETF (TMFG US) and the Motley Fool Mid Cap Growth ETF (TMFM US). Motley Fool Asset Management now offers a total of six ETFs.