Research Affiliates Deletions ETF (NIXT)

Overview

The Research Affiliates Deletions ETF (NYSE Arca: DLET) seeks long-term capital appreciation by investing in companies recently removed from major indices, based on the belief that stocks often rebound after being deleted due to behavioral biases.

Reputation and Reliability

Invesco is a well-established and reputable ETF provider with a long history in the investment management industry.

Management Expertise

Invesco has a team of experienced investment professionals managing its ETFs, providing expertise in portfolio construction and risk management.

Goal

To achieve long-term capital appreciation by investing in companies recently removed from major market indices.

Investment Approach and Strategy

Strategy: DLET does not aim to track a specific index, but rather employs a quantitative, rules-based strategy focused on companies deleted from major indices.

Composition The ETF holds a portfolio of U.S. equities that have been recently removed from major indices like the S&P 500 or Russell 1000.

Market Share: DLET holds a niche market share within the smart beta ETF space, targeting a specific factor (deletions) that is not widely replicated.

Total Net Assets (AUM): 128300000

Key Competitors

• iShares Russell 2000 ETF (IWM)
• SPDR S&P 600 Small Cap ETF (SPSM)
• Vanguard S&P Small-Cap ETF (VB)

Competitive Landscape

The ETF industry is highly competitive. DLET's competitive advantage lies in its unique focus on companies deleted from indices, offering potential for contrarian returns. Competitors are broad-based index ETFs covering a much wider range of stocks.

Historical Performance: Historical performance data needs to be accessed from financial data providers.

Benchmark Comparison: The ETFu2019s performance should be compared to a broad market index like the Russell 2000 or a custom index of deleted stocks to assess its effectiveness.

Expense Ratio: 0.39

Average Trading Volume

The ETF's average trading volume provides an insight into how easily shares can be bought or sold, with higher volume generally indicating better liquidity.

Bid-Ask Spread

The ETF's bid-ask spread indicates the cost of trading the ETF, with a narrower spread indicating lower trading costs.

Market Environment Factors

Market sentiment, index reconstitution activity, and broader economic conditions can affect DLET. A bear market may increase the number of deletions.

Growth Trajectory

The ETF's growth depends on its ability to attract assets based on its performance and the perceived value of its unique investment strategy.

Competitive Edge

DLET's competitive advantage is its focus on companies deleted from major indices, a strategy based on behavioral finance principles. This niche focus offers the potential for outperformance as these companies may be undervalued due to forced selling. The fund's rules-based approach ensures consistent application of its strategy. However, success is dependent on this strategy outperforming broad market returns.

Volatility

The volatility of DLET can be assessed by examining its historical price fluctuations and beta. Since it holds recently deleted stocks, volatility may be higher than a broad market index.

Market Risk

DLET is subject to market risk, as the value of its holdings can decline due to overall market downturns or negative sentiment towards specific sectors or companies.

Ideal Investor Profile

DLET is suitable for investors seeking capital appreciation with a higher risk tolerance, and who believe in the potential for companies to rebound after index deletion.

Market Risk

DLET is best suited for investors who understand the risks of contrarian investing and are comfortable with potential volatility, potentially as a complement to a core portfolio of broad market index funds.

The Research Affiliates Deletions ETF (DLET) provides a unique investment strategy by focusing on companies recently removed from major indices. This strategy aims to capitalize on the potential undervaluation of these companies due to forced selling. However, DLET carries higher risk due to the potential volatility of its holdings. It is best suited for risk-tolerant investors seeking a contrarian approach to capital appreciation. DLET should be considered as a tactical allocation rather than a core holding.

• IWM
• VB
• VBR
• SCHA
• SPSM

Data Sources:

• Invesco website
• ETF.com
• Morningstar
• Bloomberg

Disclaimers:

This analysis is for informational purposes only and does not constitute financial advice. Investors should conduct their own research and consult with a financial advisor before making any investment decisions. Market data is subject to change.