Rising Interest Rates

In the economic and market climate that we have observed during the first quarter of 2022, we believe balance and valuations are more important now than ever. For the first time in over 3 years, the Federal Reserve has raised interest rates. In addition to the formality of increasing the federal funds rate by 25 basis points, they have indicated an intention to raise interest rates further this year to combat some of the highest inflation rates observed in nearly 40 years. As such, we believe this is the beginning of a rising interest rate environment, which is an environment that, through our research, has generally been detrimental to stocks with high valuations, given the increased discount rates on cash flow. We believe that investors who are looking for growth ought to do so in a deliberate and disciplined fashion.

We customize our index-based strategies versus licensing off-the-shelf indexes from major index providers to allow investors to have access to alternative strategies based on our research. Global Beta believes valuations and diversification are important. We believe market cap weighted indexes are counter intuitive to investing – they essentially buy high/sell low. We want to provide investors exposure at the right price, which is why regular rebalancing is critical and why Global Beta rebalances its custom indexes quarterly.

One of the biggest advantages regular rebalancing is that our strategies weight their exposures based on specific fundamentals as opposed to benchmark indices which weight their constituents by market cap. Through our decades of experience, empirical observations, and academic research; we have found that companies with better valuations had outperformed over the long run. In fact, we built a regression analysis that details the monthly points in time of the S&P 500’s price-to-sales ratio and its corresponding 10-year forward looking return.

10 Year Forward Looking

10 Year Forward Looking Return

Source: FactSet Research Systems from 1/1/1985 through 12/31/21

As you can see, in the instances where the S&P 500 Index was on the lower end of its price-to-sales ratio spectrum, it had outperformed over the following 10 years versus periods where it was on the higher end of its price-to-sales ratio spectrum. In fact, you’ll notice that when the S&P 500 has eclipsed a price-to-sales ratio of 1.5, it has rarely exceeded a 5% annualized return over the next 10 years.

This is why we design our factor-based indexes around the concept of valuation. Further, while academics continue to identify new factors in the marketplace, we believe yield, growth, and volatility are the 3 main factors that investors need to manage between, particularly over the last 10-15 years. This is why we built our Global Beta Smart Income Index, our FactSet Rising Stars Index, and our Global Beta Low Beta Index, respectively.

The Global Beta Smart Income ETF (“GBDV”), in accordance with our Global Beta Smart Income Index, rebalanced at the close of 03/18/22.

  • GBDV rebalances quarterly to align itself with high dividend paying companies at attractive prices on a diversified basis.
  • The fund’s rebalance resets its portfolio characteristics to help improve the portfolio’s yield, valuations, and neutralizes sector bias.
  • Global Beta’s customization process for this factor seeks to identify high dividend paying companies across every sector and at more attractive valuations.
Global Beta Smart Income

Below you will find notable securities that were removed from the index, given their current yields and valuations:

Notable Deletions

Ticker Company Name Former Index Weight Current Price-to-Sales Ratio Current 12-Month Trailing Dividend Yield
PFE Pfizer Inc. 4.21% 3.81 2.90%
LMT Lockheed Martin Corporation 5.62% 1.82 2.45%
CVX Chevron Corporation 1.11% 2.02 3.30%
STX Seagate Technology Holdings PLC 0.83% 1.73 2.94%
CSX CSX Corporation 0.97% 6.64 1.03%
GIS General Mills, Inc. 1.38% 2.07 3.25%
UE Urban Edge Properties 0.03% 5.39 3.18%
EVRG Evergy, Inc. 0.43% 2.67 3.35%
HBI Hanesbrands Inc. 0.50% 0.79 3.91%

Former weight as of 03/18/22. Current price-to-sales ratio as of 03/18/22. 12-month trailing dividend yield based on price from 03/18/22 and 12-month trailing revenue as of most recently reported fiscal quarter. Price-to-sales takes the company’s current market capitalization and divides by the company’s most recently reported 12-month trailing revenue.

Below you will find securities that the index added during the rebalance, given their yields and valuations:

Notable Additions

Ticker Company Name New Index Weight Current Price-to-Sales Ratio Current 12-Month Trailing Dividend Yield
PCH PotlatchDeltic Corporation 0.09% 2.82 3.00%
RRX Regal Rexnord Corporation 0.27% 2.02 0.80%
MDU MDU Resources Group Inc 0.40% 0.93 3.26%
CPB Campbell Soup Company 0.58% 1.55 3.48%
BEN Franklin Resources, Inc. 0.63% 1.56 4.09%
CAG Conagra Brands, Inc. 0.80% 1.37 3.79%
DKS Dick’s Sporting Goods, Inc. 0.83% 0.97 1.47%
AGCO AGCO Corporation 0.85% 0.93 0.58%
T AT&T Inc. 4.39% 0.99 8.98%
CAH Cardinal Health, Inc. 4.67% 0.09 3.40%

New weight as of 03/18/22. Current price-to-sales ratio as of 03/18/22. 12-month trailing dividend yield based on price from 03/18/22 and 12-month trailing revenue as of most recently reported fiscal quarter. Price-to-sales takes the company’s current market capitalization and divides by the company’s most recently reported 12-month trailing revenue.

Turnover Recap

Current Price-to-Sales Ratio Year-Over-Year Growth
Additions 1.32 3.29%
Deletions 2.99 2.92%

Current price-to-sales ratio as of 03/18/22. 12-month trailing dividend yield based on price from 03/18/22 and 12-month trailing revenue as of most recently reported fiscal quarter. Price-to-sales takes the company’s current market capitalization and divides by the company’s most recently reported 12-month trailing revenue. Dividend yield is calculated by dividing the dividends paid by the company over the past 12 months into the company’s current market capitalization.

As a reminder, our index methodology contemplates yield across all sectors. While yield for some securities may seem low on an absolute basis, it is actually high among its peers. This allows the index to be more diversified while also delivering the opportunity for a strong yield. The Turnover Recap table is a summary of the characteristics between the securities that were added versus those that were removed.

Please visit GBDV GlobalbetaETF to view the index’s new holdings and find out more about the index and its investment objective!

Dividends represent past performance, and there is no guarantee that they will continue to be paid. The dividend yield is not representative of the index’s yield.

Before investing you should carefully consider the Fund’s investment objectives, risks, charges, and expenses. This and other information is in the prospectus or summary prospectus. A copy may be obtained by visiting www.globalbetaetfs.com or calling (833) 933-2083. Please read the prospectus or summary prospectus carefully before investing.

The Global Beta Rising Stars ETF (“GBGR”), in accordance with our FactSet Rising Stars Index, rebalanced at the close of 03/18/22.

  • GBGR rebalances quarterly to align itself with technology companies that are demonstrating the greatest advance in their industries, while trying to avoid companies with extreme valuations.
  • GBGR’s quarterly rebalance helps the portfolio reset its portfolio characteristics, such that we rotate into names with better valuations that are demonstrating compelling and strong growth trends.
  • Through our customization process, we want to find growth opportunities before they get too expensive.
  • In this potential rising interest rate environment, we believe stocks with high valuations are particularly vulnerable.
Global Beta Rising Stars

Below you will find notable securities that were removed from the index during the rebalance, given their growth trends and valuations:

Notable Deletions

Ticker Company Name Former Weight Current Price-to-Sales Ratio Year-Over-Year Sales Growth
NPTN NEOPHOTONICS CORP 0.59% 2.70 -21.79%
PRO PROS HOLDINGS INC 0.80% 5.84 -0.40%
CHKP CHECK POINT SOFTWARE TECH LTD ORD 0.71% 8.66 4.93%
NLOK NORTONLIFELOCK INC. 0.66% 5.89 10.39%
MRCY MERCURY SYS INC 0.89% 3.83 13.24%
VIAV VIAVI SOLUTIONS INC 0.65% 3.19 13.41%
EVTC EVERTEC INC 0.58% 5.27 15.51%
SWCH SWITCH INC 1.80% 6.74 15.74%
RAMP LIVERAMP HLDGS INC 1.04% 5.26 17.82%
FLT FLEETCOR TECHNOLOGIES INC 1.78% 7.10 18.62%

Former weight as of 03/18/22. Current price-to-sales ratio and year-over-year sales growth as of 03/18/22. Year-over-year sales growth based on the company’s most recently reported 12-month trialing revenue divided by the company’s 12-month trailing revenue from exactly one year prior. Price-to-sales takes the company’s current market capitalization and divides by the company’s most recently reported 12-month trailing revenue.

Below you will find notable securities that were added to the index during the rebalance, given their current market share trends and valuations:

Notable Additions

Ticker Company Name New Weight Current Price-to-Sales Ratio Year-Over-Year Sales Growth
EBIX Ebix, Inc. 0.65% 1.09 59.04%
POSH Poshmark, Inc. Class A 0.66% 3.16 25.93%
ACCD Accolade, Inc. 0.88% 4.43 77.09%
FUBO fuboTV Inc. 0.91% 1.71 193.16%
FTCH Farfetch Limited Class A 0.97% 2.99 34.81%
DIOD Diodes Incorporated 1.02% 2.32 46.85%
APPS Digital Turbine, Inc. 1.20% 4.47 285.26%
SNX TD SYNNEX Corporation 1.40% 0.23 48.62%
BKE Buckle, Inc. 1.51% 1.46 43.64%
TWTR Twitter, Inc. 1.58% 5.93 36.63%

New weight as of 03/18/22. Current price-to-sales ratio and year-over-year sales growth as of 03/18/22. Year-over-year sales growth based on the company’s most recently reported 12-month trialing revenue divided by the company’s 12-month trailing revenue from exactly one year prior. Price-to-sales takes the company’s current market capitalization and divides by the company’s most recently reported 12-month trailing revenue.

Turnover Recap

Current Price-to-Sales Ratio Year-Over-Year Growth
Additions 2.78 85.10%
Deletions 5.45 8.75%

Current price-to-sales ratio and year-over-year sales growth as of 03/18/22. Year-over-year sales growth based on the company’s most recently reported 12-month trialing revenue dividend by the company’s 12-month trailing revenue from exactly one year prior. Price-to-sales takes the company’s current market capitalization and divides by the company’s most recently reported 12-month trailing revenue.

The Turnover Recap table is a summary of the characteristics for the securities that were sold from the index versus those that were added. By virtue of our index methodology, the index seeks to identify stocks showing recent growth trends but at appropriate relative valuations.

Please visit GBGR GlobalbetaETF to view the index’s new holdings and find out more about the index and its investment objective!

Before investing you should carefully consider the Fund’s investment objectives, risks, charges, and expenses. This and other information is in the prospectus or summary prospectus. A copy may be obtained by visiting www.globalbetaetfs.com or calling (833) 933-2083. Please read the prospectus or summary prospectus carefully before investing.

The Global Low Beta ETF (“GBLO”), in accordance with our Global Beta Low Beta Index, rebalanced at the close of 03/18/22.

  • GBLO rebalances quarterly to align itself with securities that both reduce systematic risk and valuation risk.
  • GBLO’s quarterly rebalance helps the portfolio reset its portfolio characteristics, such that we rotate into names with lower systematic risk at better valuations.
  • Through our customization process, we attempt to protect investors from volatility generated through broad market corrections by reducing both systematic exposure and valuation risk.
  • In this potential rising rate environment, we believe volatility may persist and securities with better valuations will help investors seeking protection.
Global Beta Low Beta

Below you will find notable securities that were deleted to the index during the rebalance, given their relative market beta and valuations:

Notable Deletions

Ticker Company Name Former Weight Current Price-to-Sales Ratio Current One-Year Beta
EXR Extra Space Storage Inc. 0.05% 17.39 0.62
SBAC SBA Communications Corp. Class A 0.07% 15.77 0.62
ARE Alexandria Real Estate Equities, Inc. 0.07% 13.50 0.72
CCI Crown Castle International Corp 0.19% 11.99 0.61
EQIX Equinix, Inc. 0.17% 9.78 0.62
LLY Eli Lilly and Company 1.07% 9.32 0.69
DHR Danaher Corporation 0.90% 7.24 0.75
TMO Thermo Fisher Scientific Inc. 1.22% 5.97 0.69
ABT Abbott Laboratories 1.30% 5.06 0.67
MRNA Moderna, Inc. 0.27% 4.11 1.25

Former weight as of 03/18/22. Current price-to-sales ratio as of 03/18/22. One-year beta based on correlation in daily returns of the company compared to the S&P 500 from 03/18/21 to 03/18/22 multiplied by the quotient of the standard deviation of returns for the company and the S&P 500. Price-to-sales takes the company’s current market capitalization and divides by the company’s most recently reported 12-month trailing revenue. Correlation is the relationship between one series of returns and the next with a ratio of 1 implying a perfect relationship and 0 implying no relationship at all. Standard deviation is the variation in returns over a period of time. The S&P 500 is an index of 500 leading companies and covers approximately 80% of available market capitalization.

Below you will find securities that were added to the index, given their relative market beta and valuations:

Notable Additions

Ticker Company Name New Weight Current Price-to-Sales Ratio Current One-Year Beta
CAH Cardinal Health, Inc. 4.94% 0.09 0.58
ABC AmerisourceBergen Corporation 4.94% 0.15 0.46
MCK McKesson Corporation 5.07% 0.18 0.55
ADM Archer-Daniels-Midland Company 2.43% 0.58 0.50
CHRW C.H. Robinson Worldwide, Inc. 0.67% 0.61 0.44
ALL Allstate Corporation 1.47% 0.80 0.51
EXC Exelon Corporation 0.98% 1.09 0.43
XOM Exxon Mobil Corporation 5.21% 1.25 0.42
CVX Chevron Corporation 4.35% 2.02 0.37
CHTR Charter Communications, Inc. Class A 1.41% 2.11 0.47

New weight as of 03/18/22. Current price-to-sales ratio as of 03/18/22. One-year beta based on correlation in daily returns of the company compared to the S&P 500 from 03/18/21 to 03/18/22 multiplied by the quotient of the standard deviation of returns for the company and the S&P 500. Price-to-sales takes the company’s current market capitalization and divides by the company’s most recently reported 12-month trailing revenue. Correlation is the relationship between one series of returns and the next with a ratio of 1 implying a perfect relationship and 0 implying no relationship at all. Standard deviation is the variation in returns over a period of time. The S&P 500 is an index of 500 leading companies and covers approximately 80% of available market capitalization.

Turnover Recap

Current Price-to-Sales Ratio Current One-Year Beta
Additions 0.89 0.47
Deletions 10.01 0.72

Current price-to-sales ratio as of 03/18/22. One-year beta based on correlation in daily returns of the company compared to the S&P 500 from 03/18/21 to 03/18/22 multiplied by the quotient of the standard deviation of returns for the company and the S&P 500. Price-to-sales takes the company’s current market capitalization and divides by the company’s most recently reported 12-month trailing revenue. Correlation is the relationship between one series of returns and the next with a ratio of 1 implying a perfect relationship and 0 implying no relationship at all. Standard deviation is the variation in returns over a period of time. The S&P 500 is an index of 500 leading companies and covers approximately 80% of available market capitalization.

As a reminder, our methodology contemplates risk based on beta relative to the S&P 500 Index. Therefore, as relative risk changes in the makeup of a particular security in relation to the risk profile of the S&P 500, our index reflects those changes. We believe this allows us to identify securities that are contrarian to the overall market.

Please visit GBLO GlobalbetaETF to view the index’s new holdings and find out more about the index and its investment objective!

Before investing you should carefully consider the Fund’s investment objectives, risks, charges, and expenses. This and other information is in the prospectus or summary prospectus. A copy may be obtained by visiting www.globalbetaetfs.com or calling (833) 933-2083. Please read the prospectus or summary prospectus carefully before investing.

Definitions

S&P 900: The S&P 900 combines the S&P 500 and the S&P 400 to form an investable benchmark for the mid- to large-cap segment of the U.S. equity market.

Dow Jones Dividend Index: The Dow Jones U.S. Select Dividend Index aims to represent the U.S.’s leading stocks by dividend yield.

Price-to-earnings – the ratio of a company’s market capitalization versus its 12-month trailing earnings.

S&P 500 – an index of 500 leading companies and covers approximately 80% of available market capitalization.

Before investing you should carefully consider the Fund’s investment objectives, risks, charges, and expenses. This and other information is in the prospectus or summary prospectus. A copy may be obtained by visiting www.globalbetaetfs.com or calling (833) 933-2083. Please read the prospectus or summary prospectus carefully before investing.

 

GBDV’s primary risks:

Mid-Capitalization Securities Risk
The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.

Concentration Risk
To the extent that the Target Fund is concentrated in a particular industry, group of industries or sector, the Fund is also expected to be concentrated in that industry, group of industries or sector, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry, group of industries or sector.

Dividend-Paying Securities Risk
The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.

Large Capitalization Securities Risk
The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.

 

GBGR’s primary risks:

Mid-Capitalization Securities Risk
The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.

Concentration Risk
To the extent that the Target Index is concentrated in a particular industry, group of industries or sector, the Fund is also expected to be concentrated in that industry, group of industries or sector, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry, group of industries or sector.

Dividend-Paying Securities Risk
The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.

Large Capitalization Securities Risk
The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.

 

GBLO’s primary risks:

Mid-Capitalization Securities Risk
The securities of mid-capitalization companies are often more volatile and less liquid than the stocks of larger companies and may be more affected than other types of securities during market downturns. Compared to larger companies, mid-capitalization companies may have a shorter history of operations, and may have limited product lines, markets or financial resources.

Concentration Risk
To the extent that the Target Index is concentrated in a particular industry, group of industries or sector, the Fund is also expected to be concentrated in that industry, group of industries or sector, which may subject the Fund to a greater loss as a result of adverse economic, business or other developments affecting that industry, group of industries or sector.

Dividend-Paying Securities Risk
The Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.

Large Capitalization Securities Risk
The securities of large market capitalization companies may underperform other segments of the market because such companies may be less responsive to competitive challenges and opportunities and may be unable to attain high growth rates during periods of economic expansion.

Distributor: Compass Distributor, LLC

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