TCAF: Active Strategy With Mostly Encouraging Performance, Worth Following

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alfexe/iStock via Getty Images Launched in June last year, the T. Rowe Price Capital Appreciation Equity ETF (NYSEARCA:TCAF) has already delivered rather robust returns, even slightly beating the SPDR...

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Rowe Price Capital Appreciation Equity ETF (NYSEARCA:TCAF) has already delivered rather robust returns, even slightly beating the SPDR...</p>\n\n<a href=\"https://seekingalpha.com/article/4678060-tcaf-etf-active-strategy-with-mostly-encouraging-performance-worth-following\">Source Link</a>\n\n</div>\n","source":"seekingalpha_fund","html":"<!DOCTYPE html>\n<html>\n<head>\n<meta http-equiv=\"Content-Type\" content=\"text/html; charset=utf-8\" />\n<meta name=\"viewport\" content=\"width=device-width,initial-scale=1.0,minimum-scale=1.0,maximum-scale=1.0,user-scalable=no\"/>\n<meta name=\"format-detection\" content=\"telephone=no,email=no,address=no\" />\n<title>TCAF: Active Strategy With Mostly Encouraging Performance, Worth Following</title>\n<style type=\"text/css\">\na,abbr,acronym,address,applet,article,aside,audio,b,big,blockquote,body,canvas,caption,center,cite,code,dd,del,details,dfn,div,dl,dt,\nem,embed,fieldset,figcaption,figure,footer,form,h1,h2,h3,h4,h5,h6,header,hgroup,html,i,iframe,img,ins,kbd,label,legend,li,mark,menu,nav,\nobject,ol,output,p,pre,q,ruby,s,samp,section,small,span,strike,strong,sub,summary,sup,table,tbody,td,tfoot,th,thead,time,tr,tt,u,ul,var,video{ font:inherit;margin:0;padding:0;vertical-align:baseline;border:0 }\nbody{ font-size:16px; line-height:1.5; color:#999; background:transparent; }\n.wrapper{ overflow:hidden;word-break:break-all;padding:10px; }\nh1,h2{ font-weight:normal; line-height:1.35; margin-bottom:.6em; }\nh3,h4,h5,h6{ line-height:1.35; margin-bottom:1em; }\nh1{ font-size:24px; }\nh2{ font-size:20px; }\nh3{ font-size:18px; }\nh4{ font-size:16px; }\nh5{ font-size:14px; }\nh6{ font-size:12px; }\np,ul,ol,blockquote,dl,table{ margin:1.2em 0; }\nul,ol{ margin-left:2em; }\nul{ list-style:disc; }\nol{ list-style:decimal; }\nli,li p{ margin:10px 0;}\nimg{ max-width:100%;display:block;margin:0 auto 1em; }\nblockquote{ color:#B5B2B1; border-left:3px solid #aaa; padding:1em; }\nstrong,b{font-weight:bold;}\nem,i{font-style:italic;}\ntable{ width:100%;border-collapse:collapse;border-spacing:1px;margin:1em 0;font-size:.9em; }\nth,td{ padding:5px;text-align:left;border:1px solid #aaa; }\nth{ font-weight:bold;background:#5d5d5d; }\n.symbol-link{font-weight:bold;}\n/* header{ border-bottom:1px solid #494756; } */\n.title{ margin:0 0 8px;line-height:1.3;color:#ddd; }\n.meta {color:#5e5c6d;font-size:13px;margin:0 0 .5em; }\na{text-decoration:none; color:#2a4b87;}\n.meta .head { display: inline-block; overflow: hidden}\n.head .h-thumb { width: 30px; height: 30px; margin: 0; padding: 0; border-radius: 50%; float: left;}\n.head .h-content { margin: 0; padding: 0 0 0 9px; float: left;}\n.head .h-name {font-size: 13px; color: #eee; margin: 0;}\n.head .h-time {font-size: 11px; color: #7E829C; margin: 0;line-height: 11px;}\n.small {font-size: 12.5px; display: inline-block; transform: scale(0.9); -webkit-transform: scale(0.9); transform-origin: left; -webkit-transform-origin: left;}\n.smaller {font-size: 12.5px; display: inline-block; transform: scale(0.8); -webkit-transform: scale(0.8); transform-origin: left; -webkit-transform-origin: left;}\n.bt-text {font-size: 12px;margin: 1.5em 0 0 0}\n.bt-text p {margin: 0}\n</style>\n</head>\n<body>\n<div class=\"wrapper\">\n<header>\n<h2 class=\"title\">\nTCAF: Active Strategy With Mostly Encouraging Performance, Worth Following\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-03-14 09:41 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4678060-tcaf-etf-active-strategy-with-mostly-encouraging-performance-worth-following><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>alfexe/iStock via Getty Images Launched in June last year, the T. Rowe Price Capital Appreciation Equity ETF (NYSEARCA:TCAF) has already delivered rather robust returns, even slightly beating the SPDR...</p>\n\n<a href=\"https://seekingalpha.com/article/4678060-tcaf-etf-active-strategy-with-mostly-encouraging-performance-worth-following\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"SG9999001176.USD","symbol_name":"United Global Healthcare Acc USD","start_time":0,"source_url":"https://seekingalpha.com/article/4678060-tcaf-etf-active-strategy-with-mostly-encouraging-performance-worth-following","article_id":"2419697073","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/2057936739/image_2057936739.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2419697073","pubTimestamp":1710380519,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"As I said above, since its launch in June, TCAF has eked out a price return slightly higher than SPY. However, its outperformance turns out to be a bit more nuanced when compared to other S&P 500 ETFs like the iShares Core S&P 500 ETF , the SPDR Portfolio S&P 500 ETF , the Vanguard S&P 500 ETF , and the index itself. Seeking Alpha And it seems that even though these vehicles have slightly different price returns, TCAF has beaten all of them, as well as the index. Next, I would like to take a look at what the ETFs from the U.S. Equity class, the Large Blend sub-class, have delivered since the beginning of the year and in the previous six months. Using the ETF screener, I have identified 277 such funds, with the median year-to-date price return for the group being 8.25%. IVV has delivered a 50 bps stronger result, while TCAF has had a price return 10 bps higher than the median. That is to say, the differences are hardly significant. There are other aspects worth discussing. For a better ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"SG9999001176.USD":"United Global Healthcare Acc USD","QUAL":"iShares MSCI USA Quality Factor ETF","SPXU":"三倍做空标普500ETF","CNQ.AU":"CLEAN TEQ WATER LTD","FDN":"First Trust Dow Jones Internet I","LU1923623000.USD":"Natixis Thematics AI & Robotics Fund R/A USD","LU2125909247.SGD":"Natixis Thematics Meta H-R/A SGD","SGXZ57979304.SGD":"United Global Healthcare A Acc SGD-H","LU1429558221.USD":"Natixis Loomis Sayles US Growth Equity RA USD","IVV.AU":"ISHARES S&P 500 ETF/AUS","IE00B19Z9505.USD":"美盛-美国大盘成长股A Acc","SPY":"标普500ETF","BK4548":"巴美列捷福持仓","UPRO":"三倍做多标普500ETF","SPLG":"SPDR Portfolio S&P 500 ETF","OEF":"标普100指数ETF-iShares","LU1435385759.SGD":"Natixis Loomis Sayles US Growth Equity RA SGD-H","JQUA":"JPMorgan US Quality Factor ETF","RVTY":"REVVITY INC","DHR.AU":"Dark Horse Resources","CNQ":"加国自然资源","LU1951200564.SGD":"Natixis Thematics AI & Robotics Fund R/A SGD","TSLA":"特斯拉","VLTO":"Veralto Corporation","QUAL.AU":"VANECK MSCI INTERNATIONAL QU","IVV":"标普500指数ETF","UNH":"联合健康","IE00B19Z3B42.SGD":"Legg Mason ClearBridge - Value A Acc SGD","BK4532":"文艺复兴科技持仓","LU1169589451.USD":"ALLSPRING (LUX)  U.S. SELECT EQUITY \"A\" (USD) ACC","WTRG":"Essential Utilities, Inc.","DHR":"丹纳赫","PTC":"PTC Inc.","CHK.AU":"COHIBA MINERALS LTD","BK4534":"瑞士信贷持仓","OEX":"标普100",".SPX":"S&P 500 Index","BK4533":"AQR资本管理(全球第二大对冲基金)","IE00B7SZLL34.SGD":"Legg Mason ClearBridge - Value A Acc SGD-H","DYNF":"BlackRock U.S. Equity Factor Rotation ETF","SSO":"两倍做多标普500ETF","IE0002270589.USD":"LEGG MASON CLEARBRIDGE VALUE \"A\" (USD) INC","VOO":"Vanguard标普500ETF","SDS":"两倍做空标普500ETF","SPY.AU":"SPDR® S&P 500® ETF Trust","LU1951198990.SGD":"Natixis Thematics AI & Robotics Fund H-R/A SGD-H","SH":"标普500反向ETF","DUSA":"Davis Select U.S. Equity ETF","CHK":"切萨皮克能源"},"translate_title":"TCAF：积极的战略，表现令人鼓舞，值得效仿","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"TSLA":1,"PTC":1,"QUAL":1,"QUAL.AU":1,"RVTY":1,"SPLG":1,"JQUA":1,"IVV.AU":1,"SPY":1,"SPY.AU":1,"UNH":1,"DYNF":1,"CHK.AU":1,"WTRG":1,"VOO":1,"VLTO":1,"CHK":1,"DUSA":1,"CNQ":1,"CNQ.AU":1,"DHR":1,"DHR.AU":1,"FDN":0.9,"SPXU":0.6,"SSO":0.6,"SH":0.6,"SDS":0.6,"UPRO":0.6,"IVV":0.6,"ESmain":0.6,"OEX":0.6,".SPX":0.6,"OEF":0.6},"content_text":"alfexe/iStock via Getty Images Launched in June last year, the T. Rowe Price Capital Appreciation Equity ETF (NYSEARCA:TCAF) has already delivered rather robust returns, even slightly beating the SPDR S&P 500 ETF Trust (SPY) amid this bull market. Additionally, its assets under management have been growing consistently, now standing at $1.16 billion. Assuming such a short period and that ETFs frequently struggle to surpass even a $100 million milestone, this is clearly impressive. Investors might justly ask here whether they should consider buying into TCAF or, at least, shortlist it as an alternative to bellwether ETFs like SPY. To answer that question, I should review its strategy, provide more context on its performance, and dissect the portfolio to measure factor exposures. So let us dig in. TCAF's investment strategy TCAF is an actively managed investment vehicle, with a strategy being more of a black box as scant details are available. From the prospectus, we know that the fund does not target growth or value stocks specifically, which implies that both relatively inexpensive old-economy and overappreciated, fast-growing names might qualify for inclusion. Below, I will explain why the ETF currently has a minor growth tilt. Speaking of large-caps, the portfolio now has a weighted-average market cap of $747 billion, as per my calculations; the only mid-cap I found in this basket was Essential Utilities (WTRG), with a 60 bps weight. Regarding the characteristics TCAF favors when selecting holdings, the following information is available on its website: Using a “bottom up” approach, the fund holds approximately 100 securities of companies displaying favorable traits such as experienced and capable management, strong risk-adjusted return potential, leading or improving market position or proprietary advantages, and/or attractive relative market valuations.  What results has TCAF been delivering? As I said above, since its launch in June, TCAF has eked out a price return slightly higher than SPY. However, its outperformance turns out to be a bit more nuanced when compared to other S&P 500 ETFs like the iShares Core S&P 500 ETF (IVV), the SPDR Portfolio S&P 500 ETF (SPLG), the Vanguard S&P 500 ETF (VOO), and the index itself. Seeking Alpha And it seems that even though these vehicles have slightly different price returns, TCAF has beaten all of them, as well as the index. Next, I would like to take a look at what the ETFs from the U.S. Equity class, the Large Blend sub-class, have delivered since the beginning of the year and in the previous six months. Using the ETF screener, I have identified 277 such funds, with the median year-to-date price return for the group being 8.25%. IVV has delivered a 50 bps stronger result, while TCAF has had a price return 10 bps higher than the median. That is to say, the differences are hardly significant. There are other aspects worth discussing. For a better context, I have prepared the following scatter plot with 227 ETFs from the group that have both 6-month and YTD price returns. Created by the author using data from Seeking Alpha The main takeaway here is that although TCAF did marginally better than IVV, in the sub-class, it still was hardly the best. Among those ETFs that delivered much better performance over the periods concerned, there were a few vehicles that I covered in the past, including the most notable five listed below:    ETF 6M Price Return YTD Price Return   BlackRock U.S. Equity Factor Rotation ETF (DYNF) 20.2% 10.6%   iShares MSCI USA Quality Factor ETF (QUAL) 19.3% 11.1%   Davis Select U.S. Equity ETF (DUSA) 19.1% 11.1%   JPMorgan U.S. Quality Factor ETF (JQUA) 17.2% 9.7%   iShares S&P 100 ETF (OEF) 16.9% 9.7%   TCAF 16.6% 8.4%   Click to enlarge Data from Seeking Alpha What is under the hood at the moment? As of March 13, TCAF had a portfolio of 96 equities, with almost 28% of the net assets allocated to the Magnificent Seven ex-Tesla (TSLA), which have not qualified for inclusion for some reason. The direct consequence of the portfolio being so heavy in these market darlings is its weighted-average market cap of $747 billion. It is also bolstered by 35 mega-caps that account for over 53% of the net assets. The ETF is comparatively top-heavy, with the key 10 holdings having 36.5% weight. From the factsheet, we know that TCAF is benchmarked against the S&P 500 index. How much different are the portfolios of this ETF and the S&P 500-tracking vehicles? Let us take IVV. In fact, about 92% (87 holdings) of TCAF's equity positions can be found in IVV. In the S&P 500 ETF, they have approximately 46% weight. The top five stocks that the T. Rowe Price ETF has overweighted are listed below:        Stock Weight in TCAF Weight in IVV   Revvity (RVTY) 2.1% 0.03%   Veralto (VLTO) 1.7% 0.04%   UnitedHealth Group (UNH) 2.4% 1.04%   Danaher (DHR) 1.7% 0.38%   PTC (PTC) 1.3% 0.05%   Click to enlarge Data from the ETFs There are notable sector allocation differences as well. For example, TCAF is significantly underweight in consumer staples and overweight in industrials.   Created by the author using data from the ETFs Above, I have mentioned that TCAF takes a middle ground approach when it comes to value and growth styles. However, I would argue that the portfolio now has a growth tilt, as the facts below illustrate:    Metric Holdings as of March 13   Revenue 3Y 14.6%   EPS Fwd 14.3%   Revenue Fwd 9.4%   EBITDA Fwd 15.6%   Stock with a Quant Growth grade of B- or higher 58.5%   Click to enlarge Calculated by the author using data from Seeking Alpha and TCAF Both past and forward-looking data imply that the ETF is more into growthier companies, even though it does have exposure to names that are for some reason forecast to experience sales contraction in the near future, with about 11% allocated to them. And Chesapeake Energy (CHK) is the key detractor from the weighted-average forward revenue growth rate. The flip side of strong growth is expensiveness, as usual.    Metric Holdings as of March 13   EY 3.5%   P/S 8.3   Quant Valuation D+ or lower 88.1%   Click to enlarge Calculated by the author using data from Seeking Alpha and TCAF Speaking of quality, TCAF has built a fairly robust portfolio, so there is close to nothing to criticize. My calculations showed the following:  Only 7% of the holdings struggled to deliver positive levered free cash flow in the trailing twelve months. The weighted-average Return on Assets is healthy at 11.8%. 94.2% of the holdings have a B- Quant Profitability rating or higher.  Is it worth buying into TCAF? My verdict is that TCAF is an ETF for investors who would like to have exposure to a portfolio that is very much akin to IVV or any other S&P 500-tracking vehicle in terms of factors, but much leaner and with a minor allocation to names that potentially can secure a bit stronger returns, probably including non-U.S. companies (an example here is Canadian Natural Resources (CNQ), TCAF's 8th largest position currently). The issue that goes without saying is fees. IVV has a wafer-thin expense ratio of 3 bps, while TCAF goes with a 31 bps ER. There is no denying that this is fairly low for an actively managed ETF, yet the difference with simpler passive alternatives is nonetheless substantial, as larger fees will be eating into the total returns over the long term, with the risk being that they might eliminate the small alpha TCAF might achieve thanks to stock selection and weighting.  In sum, I like its quality & growth mix, which looks nicely designed for the current market environment. However, assuming the ETF has less than a year in the books, I suppose a Buy rating would be premature. Depending on its performance, portfolio composition changes, and investor sentiment, I might revise it higher going forward.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2419697073"}