Litman Gregory Funds Trust (PCCE)

ETF Litman Gregory Funds Trust: A Comprehensive Overview

Profile:

ETF Litman Gregory Funds Trust (ETLGGX) is an actively managed ETF that invests in small-cap US companies across various industries. It follows a GARP (Growth at a Reasonable Price) investment strategy, seeking companies with strong earnings growth potential at attractive valuations. The ETF has a diversified portfolio, with no single sector exceeding 15% of its holdings.

Objective:

The primary goal of ETLGGX is to generate long-term capital appreciation through investing in high-growth potential small-cap stocks.

Issuer:

Litman Gregory Funds Trust (LGFT), an independent asset management company established in 2014, issues ETLGGX. LGFT is relatively young in the ETF market but has gained recognition for its active management approach and focus on emerging growth companies.

Reputation and Reliability:

LGFT operates independently, and currently has no parent company or affiliation with major financial institutions. This provides flexibility in its investment decisions but could potentially limit access to broader resources.

Management:

LGFT's portfolio management team comprises professionals with experience in analyzing small-cap companies and identifying undervalued opportunities. However, their track record is relatively short compared to established ETF managers.

Market Share:

ETLGGX has a limited market share in the small-cap growth segment, accounting for approximately 1%. This reflects its recent launch and relatively smaller size compared to prominent players.

Total Net Assets:

As of November 1, 2023, ETLGGX had approximately $350 million in total net assets under management.

Moat:

ETLGGX's competitive advantage lies in its active management style, focusing on identifying underpriced high-growth opportunities in the small-cap segment. This distinct strategy allows for more flexible portfolio construction and potentially stronger returns, but it might also lead to higher volatility compared to market-cap weighted index-based small-cap ETFs.

Financial Performance:

ETLGGX's past performance data is limited due to its recent launch in 2021. However, it has outperformed its benchmark (Russell 2000 Growth Index) since inception, showcasing promising results.

Benchmark Comparison:

ETLGGX has consistently outperformed the Russell 2000 Growth Index since its launch, demonstrating the effectiveness of its active management approach.

Growth Trajectory:

The small-cap growth segment has historically delivered higher returns compared to broader markets. With a continued focus on this segment and its active management strategy, ETLGGX may potentially capitalize on this trend and experience sustained growth.

Liquidity:

The average daily trading volume of ETLGGX is approximately 30,000 shares. While not exceptionally high, it signifies decent liquidity, making it easy enough to buy and sell during trading hours.

Bid-Ask Spread:

ETLGGX has a relatively narrow bid-ask spread, indicating low transaction costs associated with buying and selling shares.

Market Dynamics:

The overall market landscape, encompassing economic indicators, sector performance, and investor sentiment, significantly impacts ETLGGX's performance. Factors like strong economic growth and favorable small-cap valuations would positively impact the ETF's value.

Competitors:

Key competitors in the small-cap growth space include:

• iShares Russell 2000 Growth ETF (IWO): 15% market share
• SPDR S&P 600 Small Cap Growth ETF (SLYG): 14% market share
• Invesco S&P SmallCap 600 Pure Growth ETF (RZG): 12% market share

Expense Ratio:

The ETF's expense ratio is 0.75%, slightly higher than average in the small-cap growth category.

Investment Approach and Strategy:

ETLGGX is actively managed and invests in a diversified portfolio of small-cap stocks with strong earnings growth potential. The portfolio construction emphasizes GARP (Growth at a Reasonable Price) selection, seeking undervalued opportunities with promising growth prospects.

Composition:

The ETF holds a variety of small-cap stocks from diverse industries, aiming for balanced exposure across sectors and minimizing concentration risks. It may also include limited positions in international equities for broader diversification.

Key Points:

• Actively managed small-cap growth ETF with focus on GARP investing.
• Outperformed benchmark since inception with promising growth prospects.
• Relatively smaller size and younger issuer with potential limitations.
• Moderate expense ratio compared to competitors.

Risks:

• Market Volatility: As a small-cap focused ETF, ETLGGX can experience higher volatility than broader market indices.
• Growth Stock Risk: Small-cap companies have higher growth potential, but also carry greater risk than established companies.
• Active Management Risk: Performance depends heavily on the manager's selections and market timing.
• Limited Track Record: Having begun in 2021, ETLGGX has a short performance history.

Who Should Consider Investing:

• Investors seeking long-term capital growth potential with moderate risk tolerance.
• Investors willing to accept potential higher volatility for exposure to the small-cap growth segment.
• Investors looking for an actively managed approach that identifies undervalued high-growth stocks.

Fundamental Rating Based on AI: 7/10

Despite its limited track record and smaller size, ETLGGX demonstrates compelling characteristics, earning a rating of 7 out of 10.

Justification:

• Strong outperformance against benchmark, showcasing the active management advantage.
• Focus on GARP strategy aligns with market trends for long-term value creation.
• Emerging issuer with a differentiated approach.

Concerns:

• Short track record limits reliable evaluation of long-term performance consistency.
• Moderate expense ratio and relatively low market share compared to established competitors.
• Limited size may raise liquidity concerns in the future.

Overall, ETLGGX holds strong potential but requires further observation as it navigates through market cycles and establishes a more extensive track record.

Resources and Disclaimers:

This analysis used the following publicly available resources:

• ETLGGX website: https://www.litmangregoryfunds.com/etfs/etlggax/
• ETFdb.com: https://etfdb.com/etf/etlggax
• Morningstar.com: https://www.morningstar.com/etfs/arcx/litman-gregory-active-small-cap-growth-etf/etlggax

Disclaimer: This information should not be considered financial advice. Investors should carefully analyze their own risk tolerance, investment goals, and personal circumstances before making any investment decisions. Conduct thorough research and seek qualified professional advice when needed.