The All Cap Growth style ranks seventh out of the twelve fund styles as detailed in our 1Q17 Style Ratings for ETFs and Mutual Funds report. Last quarter, the All Cap Growth style ranked sixth. It gets our Neutral rating, which is based on an aggregation of ratings of 14 ETFs and 543 mutual funds in the All Cap Growth style as of January 30, 2017. See a recap of our 4Q16 Style Ratings here.
Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the style. Not all, All Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 11 to 2,175). This variation creates drastically different investment implications and, therefore, ratings.
Investors seeking exposure to the All Cap Growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.
Here is our ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund’s holdings. We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.
Figure 1: ETFs with the Best & Worst Ratings – Top 5
* Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.
Sources: New Constructs, LLC and company filings
Four ETFs are excluded from Figure 1 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums. See our ETF screener for more details.
Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5
* Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.
Sources: New Constructs, LLC and company filings
NorthQuest Capital Fund (NQCFX) and Catalyst Exceed Defined Risk Fund (CLPCX) are excluded from Figure 2 because their total net assets (TNA) are below $100 million and do not meet our liquidity minimums.
Fidelity NASDAQ Composite Index Tracking Stock (ONEQ) is the top-rated All Cap Growth ETF and American Century Disciplined Growth Fund (ADRRX) is the top-rated All Cap Growth mutual fund. ONEQ earns an Attractive rating and JFACX earns a Very Attractive rating.
First Trust Equity Opportunities ETF (FPX) is the worst rated All Cap Growth ETF and Turner Midcap Growth Fund (TMGEX) is the worst rated All Cap Growth mutual fund. FPX earns a Dangerous rating and TMGEX earns a Very Dangerous rating.
The Danger Within
Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund’s performance is only as good as its holdings’ performance. Don’t just take our word for it, see what Barron’s says on this matter.
PERFORMANCE OF HOLDINGs = PERFORMANCE OF FUND
Figures 3 and 4 show the rating landscape of all, All Cap Growth ETFs and mutual funds.
Figure 3: Separating the Best ETFs From the Worst Funds
Sources: New Constructs, LLC and company filings
Figure 4: Separating the Best Mutual Funds From the Worst Funds
Sources: New Constructs, LLC and company filings
This article originally published here on January 30, 2017.
Disclosure: David Trainer, Kyle Guske II, and Kyle Martone receive no compensation to write about any specific stock, style, or theme.