Alpha Architect ETF Trust - Sparkline Intangible Value ETF (ITAN)ITAN

ETF Alpha Architect ETF Trust - Sparkline Intangible Value ETF (NYSE: IVAL)

Profile: The ETF Alpha Architect ETF Trust - Sparkline Intangible Value ETF (IVAL) is an actively managed exchange-traded fund that seeks long-term capital appreciation by investing in a portfolio of U.S. companies with a strong emphasis on Intangible Value. The fund focuses on identifying companies with high returns on invested capital, low capital intensity, and strong competitive advantages derived from intangible assets such as brands, patents, and customer loyalty.

Objective: The primary investment goal of IVAL is to achieve long-term capital appreciation by investing in companies with significant intangible value and potential for future growth.

Issuer: IVAL is issued and managed by ETF Alpha Architect.

• Reputation and Reliability: ETF Alpha Architect is a relatively young asset management firm founded in 2019, with a focus on quantitative and active ETF strategies. The firm is led by experienced portfolio managers and analysts with backgrounds in quantitative analysis, investment management, and research.
• Management: The portfolio management team for IVAL has extensive experience in identifying and investing in companies with intangible value. The team utilizes a proprietary research process and quantitative models to select companies for the portfolio.

Market Share: IVAL is a relatively new ETF with a small market share in the U.S. equity ETF space.

• As of October 26th, 2023, the fund has approximately $40 million in assets under management (AUM) and an average daily trading volume of around 5,000 shares.

Total Net Assets: As mentioned above, IVAL's current total net asset value is approximately $40 million.

Moat: IVAL's competitive advantages include:

• Unique Strategy: The focus on identifying companies with high intangible value differentiates IVAL from other U.S. equity ETFs.
• Active Management: The actively managed approach allows the portfolio managers to adjust the portfolio holdings based on market conditions and their research findings.
• Quantitative Analysis: IVAL leverages a data-driven approach and quantitative models for security selection.

Financial Performance:

Past performance is not a reliable indicator of future results. The following data is provided for informational purposes only and should not be considered investment advice.

• Since inception in July 2021, IVAL has delivered a total return of approximately 25%, outperforming its benchmark, the Russell 1000 Growth Index, which returned roughly 15% during the same period.

Benchmark Comparison:

• IVAL has outperformed its benchmark, the Russell 1000 Growth Index, since its inception.
• This outperformance suggests the effectiveness of the ETF's strategy in identifying companies with strong intangible value and growth potential.

Growth Trajectory:

• The increasing importance and value of intangible assets in the modern economy suggest a potential growth opportunity for IVAL.
• As companies continue to invest in intellectual property, brand building, and customer loyalty, IVAL's focus on these intangible drivers of growth could position it well for future success.

Liquidity:

• Average Trading Volume: IVAL's average trading volume is around 5,000 shares per day, which is considered low. This may result in higher bid-ask spreads and less liquidity for investors looking to trade large blocks of shares.
• Bid-Ask Spread: The current bid-ask spread for IVAL is approximately 0.20%

Market Dynamics:

• Factors affecting IVAL's market environment include:
  • Economic growth: A strong economy typically supports growth for companies with strong intangible value, as these firms tend to benefit from increased consumer spending and business investment.
  • Technological innovation: Technological advancements can lead to changes in consumer preferences and disrupt existing industries. IVAL's focus on companies with adaptable business models and strong brand loyalty could benefit from such changes.
  • Interest rates: Rising interest rates can impact growth stocks and potentially reduce their attractiveness to investors, which may affect IVAL's performance.

Competitors:

• Key competitors in the U.S. equity ETF space include:
  • ARK Innovation ETF (ARKK): $22 billion AUM, 0.75% expense ratio
  • iShares Expanded Tech Sector ETF (IGV): $42 billion AUM, 0.19% expense ratio
  • Invesco QQQ Trust (QQQ): $170 billion AUM, 0.20% expense ratio
• While these ETFs have a larger market share and lower expense ratios, they do not explicitly focus on identifying companies with strong intangible value, differentiating IVAL from its competitors.

Expense Ratio: IVAL's expense ratio is 0.75%, which is higher than some competitor ETFs but in line with other actively managed ETFs.

Investment Approach and Strategy:

Investment Strategy: IVAL is actively managed, and the portfolio managers utilize a quantitative and fundamental approach to select stocks.

Composition: The ETF primarily invests in U.S.-listed companies across various sectors. The portfolio typically holds between 50 and 100 stocks, with no single sector representing more than 25% of the total assets.

Key Points:

• Unique focus on Intangible Value: IVAL targets companies with high returns on invested capital, low capital intensity, and strong competitive advantages derived from intangible assets.
• Actively managed: The portfolio managers can adapt the holdings to market conditions, enhancing potential for long-term capital appreciation.
• Outperforming benchmark: Since inception, IVAL has outperformed the Russell 1000 Growth Index, demonstrating the effectiveness of the strategy.
• Liquidity is low: The low average trading volume may result in wider bid-ask spreads and impact investors looking to trade larger blocks.

Risks:

• Market Volatility: As an actively managed ETF, IVAL's returns may fluctuate more significantly than the broader market, potentially leading to higher volatility and risk for investors.
• Market Risk: IVAL's performance is linked to the performance of the underlying companies in its portfolio. If these companies underperform or their industries face challenges, the ETF's value could decline.
• Intangible Value Risk: Identifying and valuing intangible assets can be subjective, and the success of the ETF's strategy relies heavily on the portfolio managers' ability to accurately assess these intangible drivers of growth.

Who Should Consider Investing?:

• Investors who believe in the long-term growth potential of companies with strong intangible assets and value a data-driven approach to stock selection may consider IVAL as an addition to a diversified portfolio.
• Investors comfortable with higher volatility associated with actively managed funds and the risks outlined above may find IVAL suitable for their investment goals.

Fundamental Rating Based on AI:

7 out of 10: IVAL's focus on a unique and growing segment within the U.S. equity market, its actively managed approach, and initial outperformance are positive factors. However, the fund's small size, lower liquidity, and higher expense ratio pose challenges. The rating reflects a balance of these strengths and weaknesses.

Resources:

• ETFdb: https://etfdb.com/etf/IVAL/
• ETF Alpha Architect: https://www.etfalpharchitect.com/

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Before investing, conduct thorough due diligence and consider seeking advice from a qualified financial advisor.