Follow the smart money.
Every quarter, Wall Street dives through the freshly disclosed holdings of Warren Buffett, Bill Ackman, T. Boone Pickens and other so-called “smart money” investors, hoping to get some new investing ideas by the people who do it best. But occasionally, even the smart money gets a case of the yips — take Carl Icahn, a longtime expert whose hedge fund came off the wheels by dipping 18 percent in 2015, then 20 percent in 2016. Rather than hunting and pecking, then, regular investors may have a better chance at success by betting on the best ideas of dozens of smart money stock picks — which you can do via these seven “guru” ETFs.
Global X Guru Index ETF (ticker: GURU)
We’ll start with notable ticker GURU, which currently invests in 58 of the “highest-conviction ideas” across a number of hedge funds. The fund’s benchmark, the Solactive Guru Index, filters the world of hedge funds for those with at least $500 million in holdings, and with low turnover rates, then picks the top U.S.-listed equities listed across those funds’ 13Fs and equally weights them. Thus, biopharmaceutical company Incyte Corp. (INCY) and payments solution firm First Data Corp. (FDC) are among some of the smart money’s best ideas at the moment. GURU also has an internationally themed brother, Global X Guru International Index ETF (GURI).
Expenses: 0.75 percent, or $75 annually per $10,000 invested.
Goldman Sachs Hedge Industry VIP ETF (GVIP)
Goldman Sachs’ GVIP is another flavor of the high-conviction hedge fund strategy, with a few differences from GURU. This ETF’s pool of hedge funds must have more than $10 million in holdings and between 10 and 200 holdings. GVIP then equally weights 50 stocks that appear the most frequently within the top 10 holdings of its index’s hedge funds. As a result, the fund is decidedly heavy in information technology (31.5 percent) and consumer discretionary (26.8 percent) stocks, with Charter Communications (CHTR), Comcast Corp. (CMCSA) and Micron Technology (MU) among its top holdings. It’s also cheaper, at 30 basis points less than GURU.
Expenses: 0.45 percent
Validea Market Legends ETF (VALX)
While GURU and GVIP don’t name-drop any of the hedge funds they follow, VALX comes right out and lists Buffett and David Dreman as inspiration for its holdings. Thing is, it also lists Benjamin Graham, who died in 1976. What gives? Validea Funds’ only ETF, VALX, doesn’t track actual holdings, but instead interprets the strategies of legends like Buffett and Graham to create various stock-picking models across styles such as value and momentum that determine its investments. If you trust Validea’s models, you’ll be satisfied with picks like biotech Supernus Pharmaceuticals (SUPN) and for-profit educator Strayer Education (STRA).
Expenses: 0.79 percent
Direxion iBillionaire Index ETF (IBLN)
Direxion’s IBLN puts away the kiddie table and only deals with the most opulent of stock pickers. This is a small, equal-weighted 30-stock portfolio of large- and mid-cap stocks, based on the holdings of 10 billionaires selected from a pool of 100. While IBLN doesn’t specifically outline which billionaires it uses, the potential pool includes the likes of Buffett, David Einhorn, David Tepper and Daniel Loeb. Tech stocks such as Facebook (FB) and Broadcom (AVGO) lead the fund at a combined 27.7 percent, while health care plays such as AbbVie (ABBV) and financials such as American International Group (AIG) make up a roughly 20 percent apiece.
Expenses: 0.65 percent (includes 36-basis-point fee waiver)
Global X Guru Activist Index ETF (ACTX)
The ACTX is constructed much like GURU, though its methodology centers around so-called “activists” — investors who buy large stakes in companies, then try to win board seats with the ultimate goal of forcing changes they believe will unlock shareholder value. For instance, Jana Partners took a roughly 9 percent stake in current top holding Whole Foods Market (WFM) in April, then pressed it to consider a buyout. And that’s just what happened, with Amazon.com (AMZN) acquiring Whole Foods a couple weeks ago, sending shares about 30 percent higher since. Other top holdings include Yum China Holdings (YUMC) and FedEx Corp. (FDX).
Expenses: 0.75 percent
ProShares Global Listed Private Equity ETF (PEX)
Most guru ETFs buy the holdings of hedge funds and other institutional investors, but ProShares’ PEX taps a segment of the smart money market that has some publicly traded offerings: private equity. The nice thing about PEX is that it provides investors access (indirectly) to smaller, privately owned companies that they otherwise couldn’t have access to. They do so through a group of holdings that includes Canadian PE firm Onex Corp., as well as business development company Ares Capital Corp. (ARCC), which provides financing to smaller companies. PEX also sports a sizable trailing 12-month yield of more than 6 percent.
Expenses: 2.89 percent (0.6 percent excluding acquired fund fees)
AlphaClone Alternative Alpha ETF (ALFA)
ALFA features a bearish twist to guru investing. AlphaClone’s index ranks hedge funds and other institutional investors based on returns, then buys securities held by the top scorers. It equal-weights these stocks, but has an “overlap” bias that favors equities held by more smart money investors. However, ALFA also has a risk-reducing “trigger.” Should a Standard & Poor’s 500 index tracker close below its 200-day moving average, ALFA will become “market hedged” and short the S&P 500 “in an amount equal to 85 percent of the market value of the index’s long positions on the day the hedge takes effect.” It will only remove the hedge once the tracker trades above its 200-day moving average.
Expenses: 0.95 percent
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7 ETFs That Let You Invest With the ‘Smart Money’ originally appeared on usnews.com
