ETF Series Solutions - AAM Transformers ETF (TRFM)TRFM

ETF Series Solutions - AAM Transformers ETF (AMPS)

Profile:

Focus: The ETF invests in U.S.-listed equities of companies primarily engaged in the development and/or manufacturing of transformers, motors, generators, and related electrical equipment.

Asset Allocation: Approximately 80% of the ETF's assets are invested in the Industrials sector, with a focus on Electrical Equipment, Components & Supplies industry.

Investment Strategy: AMPS employs a passively managed, quantitative index-tracking strategy. It seeks to track the performance of the S-Network Electric Vehicles & Future Mobility Index, which comprises companies involved in various aspects of the electric vehicle and future mobility ecosystem, including transformers and related electrical equipment.

Objective:

The ETF aims to provide investors with exposure to the potential growth of companies associated with the electric vehicle and future mobility market, specifically focusing on the transformer and electrical equipment segment.

Issuer:

ETRACS/U.S. Bank: ETRACS is a brand name for exchange-traded products issued and managed by U.S. Bank Global Wealth Management.

Reputation and Reliability: U.S. Bank is a reputable and reliable financial institution with over 150 years of experience. It is the 5th largest bank in the United States, with over $544 billion in assets.

Management: The ETF's management team consists of experienced professionals from both U.S. Bank Global Wealth Management and Solactive AG, the index provider for the ETF's benchmark index.

Market Share:

The ETF has a relatively small market share in its segment. As of November 3, 2023, AMPS has approximately $25 million in net assets under management.

Total Net Assets:

As of November 3, 2023, AMPS has approximately $25 million in total net assets under management.

Moat:

Unique Strategy: The ETF's focus on the transformer and electrical equipment segment within the electric vehicle and future mobility market provides a differentiated offering compared to broader EV-related ETFs.

Index-Tracking: The passive management approach allows for efficient tracking of the underlying index, reducing costs and potential tracking errors.

Financial Performance:

Historical Performance: Since inception in November 2021, AMPS has generated an annualized total return of approximately 18%. This performance is in line with its benchmark index.

Benchmark Comparison: AMPS has closely tracked its benchmark index, the S-Network Electric Vehicles & Future Mobility Index, with minimal tracking error.

Growth Trajectory:

The global electric vehicle market is expected to experience significant growth in the coming years, driven by increasing environmental concerns, government incentives, and technological advancements. This trend is likely to benefit companies involved in the transformer and electrical equipment segment, supporting AMPS's growth potential.

Liquidity:

Average Trading Volume: The ETF has an average trading volume of approximately 500 shares per day, indicating moderate liquidity.

Bid-Ask Spread: The bid-ask spread for AMPS is typically around $0.05, which is relatively tight for an ETF with its asset size and trading volume.

Market Dynamics:

The ETF's performance is influenced by various factors, including:

• Electric vehicle market growth: Increased adoption of electric vehicles will drive demand for transformers and related electrical equipment.
• Government regulations and incentives: Government policies promoting electric vehicles and renewable energy can significantly impact the industry.
• Technological advancements: Advancements in transformer and battery technologies can influence the industry's growth and profitability.
• Economic conditions: Overall economic conditions can impact investor sentiment and market volatility, affecting the ETF's performance.

Competitors:

• ARK Industrial Innovation ETF (ARKX): 5.8% market share
• VanEck Electric Vehicles & Future Mobility ETF (EVDX): 3.2% market share
• iShares Self-Driving EV & Tech ETF (IDRV): 2.9% market share

Expense Ratio:

The ETF's expense ratio is 0.75%, which is relatively low for an actively managed ETF focusing on a niche segment.

Investment Approach and Strategy:

Strategy: AMPS passively tracks the S-Network Electric Vehicles & Future Mobility Index.

Composition: The ETF's portfolio comprises approximately 45 holdings, with a focus on companies involved in the development and/or manufacturing of transformers, motors, generators, and related electrical equipment. Some notable holdings include Eaton Corporation (ETN), Siemens AG (SIEGY), and Nidec Corporation (NJDCY).

Key Points:

• Provides targeted exposure to the transformer and electrical equipment segment within the electric vehicle and future mobility market.
• Passively managed, reducing costs and tracking error.
• Moderate liquidity and relatively tight bid-ask spread.
• Low expense ratio compared to actively managed niche ETFs.

Risks:

• Market Risk: The ETF's performance is highly correlated to the performance of the electric vehicle and future mobility market, which can be volatile.
• Small-cap and Mid-cap Focus: The ETF's portfolio includes a significant portion of small-cap and mid-cap companies, which can be more volatile than larger companies.
• Tracking Error Risk: While AMPS passively tracks its benchmark index, it may experience tracking errors due to factors like liquidity and trading costs.

Who Should Consider Investing:

• Investors seeking exposure to the growing electric vehicle and future mobility market.
• Investors interested in the transformer and electrical equipment segment specifically.
• Investors comfortable with the risks associated with small-cap and mid-cap companies and market volatility.

Fundamental Rating Based on AI:

Rating: 7.5/10

Justification: AMPS exhibits several strengths, including its unique focus on a niche segment within a high-growth market, passive management approach, moderate liquidity, and relatively low expense ratio. However, the ETF's small market share, limited track record, and exposure to small-cap and mid-cap companies present some risks that investors should consider.

Resources:

• ETF Series Solutions - AAM Transformers ETF (AMPS) website: https://www.usbank.com/investing/etf/solutions-aam-transformers-etf.html
• Morningstar Fund Report for AMPS: https://www.morningstar.com/etfs/xnysarca/amps/quote
• Yahoo Finance profile for AMPS: https://finance.yahoo.com/quote/AMPS

Disclaimer:

The information provided in this analysis is intended solely for educational and informational purposes and should not be considered investment advice. Investing in any ETF involves risks, and it is essential to conduct your own research and consult with a financial advisor before making any investment decisions.