Anthony L. Arsta

Portfolio Manager

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Motley Fool 100 ETF Results: Third Quarter 2018

10/16/2018
As of September 30, 2018 Third Quarter 2018 Since Inception (Inception Date: 1/30/2018)
Motley Fool 100 ETF (TMFC) NAV Return 10.15% 10.77%
Motley Fool 100 ETF (TMFC) Market Price Return 9.93% 10.70%
S&P 500 Index Return 7.71% 3.50%

 

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 was created to provide a portfolio of 100 companies that The Motley Fool believes are high-quality businesses. After a market decline in the first few months of the year, performance has been great for the past two quarters. The Motley Fool 100 ETF’s 10.77% return since inception is outpacing the S&P 500’s 3.50%, and that’s nice to see, but we prefer to focus on longer-term results. We invest with an ownership mentality toward our stocks, which we believe encourages holding for the long term over short-term trading.

Performance during the quarter was led by outstanding results from companies in a variety of industries. Payment processor Square gained an astounding 60%, hospital operator HCA Healthcare returned 36%, and DNA sequencing provider Illumina was up 31%. Other companies, including Corning, United Continental, CVS Health, Southwest Airlines, and Splunk, all gained more than 20%.

 

Since the Motley Fool 100 index is market-cap weighted, the largest companies had the greatest effect on fund performance. Apple’s 22% return during the quarter was by far the largest contributor, followed by the strong performance of fellow mega-caps Amazon.com (18%), Microsoft (16%), and Berkshire Hathaway (15%).

 

Most of the underperforming holdings in the index were quite small. The one glaring exception was Facebook, which still accounts for more than 4% of assets even after the stock dropped 15% during the quarter. The other bottom dwellers for the quarter each make up less than 0.5% of fund assets, including Twitter (down 35%), Tesla (down 23%), Ford Motor (down 15%), Electronic Arts (down 15%), and LAM Research (down 12%).

 

Our long-term, market-cap weighted approach allows us to own high-quality businesses without excess activity. But The Motley Fool’s analysts do regularly update their views on recommended companies, and the index is rebalanced quarterly to incorporate any new information. During the late-September rebalance, we welcomed five new companies into the fund. Chip producer Intel returned to the index after a decline from recent highs. We also added biotech giant Amgen, with its $130 billion market cap being enough to make it one of the 20 largest holdings in the ETF. Also new to the ETF is cloud software provider ServiceNow, which offers a platform designed to improve company workflow.

 

At the bottom of the index, Match Group and Broadridge Financial Solutions are long-term analyst favorites that recently grew large enough to sneak in. To make room for these additions, we removed CoStar Group, Expedia Group, Nasdaq, Take-Two Interactive, and XPO Logistics.

 

You can see the full list of holdings in the ETF, updated daily, at http://holdings.filepoint.com/api/MotleyFool/TMFC/pdf 

 

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 or Foreside Fund Distributors, LLC.

 

The net asset value (“NAV”) of the Fund’s shares is determined as of the close of regular trading on the NYSE (generally 4:00 p.m. Eastern time) each day the NYSE is open. Share are purchased and sold in secondary market transactions at negotiated market prices rather than at NAV. Shares of the Fund may be bought and sold throughout the day on the exchange through a brokerage account. However, shares are not individually redeemable, and may only be redeemed directly from the Fund by Authorized Participants in very large creation/redemption units. Shares may trade at, above or below NAV. Brokerage commissions will reduce returns.

 

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.

 

For these and other reasons, there is no guarantee the Fund will achieve its stated objective.

 

MFAM is a wholly owned subsidiary of The Motley Fool Holdings, Inc., which is a multimedia financial-services holding company. MFAM is a separate entity, and all investment decisions are made independently by the asset managers at MFAM. Neither of TMF co-founders, Tom Gardner and David Gardner, nor any other TMF analyst is involved in the investment decision-making or daily operations of MFAM.