Growth and momentum are the latest factors in focus at WisdomTree.
The firm launched the WisdomTree U.S. Growth & Momentum Fund (WGRO) on June 24 to capture the zeitgeist of momentum trading in a more organized way, said Jeremy Schwartz, executive vice president and global head of research at WisdomTree.
WisdomTree partnered with longtime growth investor Bill O’Neill, founder of Investor’s Business Daily, to leverage his methods for finding tactical ways to buy into growth stocks.
O’Neill, whose strategy is sometimes abbreviated to CANSLIM, tends to look for names with long-term uptrends, strong earnings and sales growth and a recent dose of bad luck.
“This is hopefully going to give you some of those prime, O’Neill-style growth stocks with those downward volatility adjustments to avoid overcrowding,” Schwartz told CNBC’s “ETF Edge” on Monday.
Unlike some other momentum-based ETFs, WGRO will also rebalance monthly to preserve its momentum slant, Schwartz said.
Its top five holdings as of Tuesday were Generac, Enphase Energy, Roku, Crowdstrike and Deckers Outdoor, but that lineup could change by the end of the week, he said.
WGRO is factor weighted and has an expense ratio of 0.55%. In this case, its factor weighting feels similar to equal weighting as all of its holdings range from roughly 1% to 2% of the portfolio.
That factor weighting can serve investors when things turn sour, WallachBeth Capital managing director Andrew McOrmond said in the same “ETF Edge” interview.
“When a momentum name is high for no reason other than just Robinhood piling into the name, that is likely going to correct at some point and the equal weighting monthly will kind of dampen that and actually return some alpha,” McOrmond said.
His only concern was where WGRO was going to find downtrodden growth stocks when markets are largely on the rise.
“I think that limits the potential upside only because everything is growing right now. But I am a believer that we could have a pullback, a little correction, … and growth’s going to come out of favor and that monthly rebalance should help,” McOrmond said.
