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.
*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).
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