AIEQ: Time To Give This AI-Powered ETF The 'Old Yeller' Treatment

seekingalpha04-19

AIEQ relies on several models powered by IBM's Watson to select stocks across all U.S. market segments. The ETF has a 0.75% expense ratio and $101 million in assets.Results in 2020 were strong. ...

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The ETF has a 0.75% expense ratio and $101 million in assets.Results in 2020 were strong. ...</p>\n\n<a href=\"https://seekingalpha.com/article/4684579-aieq-time-to-give-this-ai-powered-etf-the-old-yeller-treatment\">Source Link</a>\n\n</div>\n","source":"seekingalpha","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>AIEQ: Time To Give This AI-Powered ETF The 'Old Yeller' Treatment</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\">\nAIEQ: Time To Give This AI-Powered ETF The 'Old Yeller' Treatment\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-04-19 04:51 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4684579-aieq-time-to-give-this-ai-powered-etf-the-old-yeller-treatment><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>AIEQ relies on several models powered by IBM's Watson to select stocks across all U.S. market segments. The ETF has a 0.75% expense ratio and $101 million in assets.Results in 2020 were strong. ...</p>\n\n<a href=\"https://seekingalpha.com/article/4684579-aieq-time-to-give-this-ai-powered-etf-the-old-yeller-treatment\">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":"LU0266013472.USD","symbol_name":"AXA WF - Framlington Longevity Economy A Cap USD","start_time":0,"source_url":"https://seekingalpha.com/article/4684579-aieq-time-to-give-this-ai-powered-etf-the-old-yeller-treatment","article_id":"2428547431","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1208088086/image_1208088086.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2428547431","pubTimestamp":1713473499,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"AIEQ relies on several models powered by IBM's Watson to select stocks across all U.S. market segments. The ETF has a 0.75% expense ratio and $101 million in assets.Results in 2020 were strong. Howeve","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0266013472.USD":"AXA WF - Framlington Longevity Economy A Cap USD","SPY.AU":"SPDR® S&P 500® ETF Trust","NCLH":"挪威邮轮","BK4543":"AI","BK4524":"宅经济概念","LU0289739699.SGD":"AB INTERNATIONAL HEALTH CARE PORTFOLIO \"A\" (SGD) ACC","BK4527":"明星科技股","BLK":"贝莱德","UPRO":"三倍做多标普500ETF","IE00BJT1NW94.SGD":"JANUS HENDERSON GLOBAL LIFE SCIENCES \"A2\" (SGDHDG) ACC","IE00BMPRXR70.SGD":"Neuberger Berman 5G Connectivity A Acc SGD-H","BLK.AU":"Blackham Resources Ltd","IE00BSNM7G36.USD":"NEUBERGER BERMAN SYSTEMATIC GLOBAL SUSTAINABLE VALUE \"A\" (USD) ACC","SH":"标普500反向ETF","BK4134":"信息科技咨询与其它服务","SSO":"两倍做多标普500ETF","MRK":"默沙东","IBM":"IBM","TSLA":"特斯拉","LU0823414478.USD":"法巴经典能源转换基金","LU0061474705.USD":"THREADNEEDLE (LUX) GLOBAL DYNAMIC REAL RETURN \"AU\" (USD) ACC","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","W":"Wayfair","LU0130102774.USD":"Natixis Harris Associates US Equity RA USD","SPXU":"三倍做空标普500ETF","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD","LU1852331112.SGD":"Blackrock World Technology Fund A2 SGD-H","LU0868494617.USD":"UBS (LUX) EQUITY SICAV - US TOTAL YIELD SUSTAINABLE \"P\" (USD) ACC","IE00B1BXHZ80.USD":"Legg Mason ClearBridge - US Appreciation A Acc USD","OEX":"标普100",".SPX":"S&P 500 Index","LU1548497426.USD":"安联环球人工智能AT Acc","IE00BFSS8Q28.SGD":"Janus Henderson Balanced A Inc SGD-H","LU0823411888.USD":"法巴消费创新基金 Cap","SPY":"标普500ETF","AIEQ":"Amplify AI Powered Equity ETF","IVV":"标普500指数ETF","SG9999014542.SGD":"United Income Focus Trust Acc SGD","LU1585245621.USD":"EASTSPRING INV GLOBAL LOW VOLATILITY EQUITY FUND \"A\" (USD) ACC B","LU0348723411.USD":"ALLIANZ GLOBAL HI-TECH GROWTH \"A\" (USD) INC","FDN":"First Trust Dow Jones Internet I","NVDA":"英伟达","SDS":"两倍做空标普500ETF","SG9999013999.USD":"UOB UNITED GLOBAL HEALTHCARE FUND (USDHDG) INC","IE00BFSS7M15.SGD":"Janus Henderson Balanced A Acc SGD-H","LU0109391861.USD":"富兰克林美国机遇基金A Acc","OEF":"标普100指数ETF-iShares","LU1023059063.AUD":"BGF WORLD HEALTHSCIENCE \"A2\" (AUDHDG) ACC","LU2106854487.HKD":"ALLIANZ THEMATICA \"AMG\" (HKD) INC"},"translate_title":"AIEQ：是时候给这个人工智能驱动的ETF“老家伙”待遇了","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AIEQ":1,"W":1,"TSLA":1,"SPY.AU":1,"SPY":1,"NVDA":1,"NCLH":1,"MRK":1,"FDN":1,"BLK.AU":1,"BLK":1,"IBM":0.9,"OEF":0.6,"OEX":0.6,"SDS":0.6,"SH":0.6,"SPXU":0.6,"SSO":0.6,"UPRO":0.6,".SPX":0.6,"ESmain":0.6,"IVV":0.6},"content_text":"AIEQ relies on several models powered by IBM's Watson to select stocks across all U.S. market segments. The ETF has a 0.75% expense ratio and $101 million in assets.Results in 2020 were strong. However, AIEQ's long-term track record is poor, lagging behind SPY by 62% since its November 2017 inception. AIEQ's six-month rolling win rate is only 38%.One of the advertised benefits of AIEQ's models is that they \"learn\" over time. However, portfolio turnover skyrocketed to 2719% last year, and results seem to be getting worse.In addition, the models consistently rotate into low-quality, highly-volatile stocks, which explains its poor track record. I view the risk as enormous.I've assigned a \"Strong Sell\" rating to AIEQ. The AI experiment failed, and investors should deploy capital into more stable alternatives.   hapabapaInvestment Thesis The Amplify AI Powered Equity ETF (NYSEARCA:AIEQ) continues to underperform the SPDR S&P 500 ETF (SPY), lagging by 5% since I issued a \"strong sell\" rating in August 2023 and 62% since its October 2017 launch date. AIEQ's \"deep-learning\" capabilities are questionable at this point, but its selections remain low-quality and highly volatile, so I view the risk as enormous. Therefore, I'm reiterating my \"strong sell\" rating on AIEQ, and I look forward to taking you through the reasons why in more detail below. AIEQ Overview According to its Fund Page, AIEQ tracks the AI Powered Equity Index, which runs on the IBM Watson platform. The AI-driven proprietary strategy is based on various data-intensive models, which ETF Managers Group promotes as a way to eliminate human bias and errors and benefit from machine learning capabilities that \"perpetually grow in value.\" The graphic below summarizes how AIEQ scores each company based on 92 signals covering the Financial Health, News, Management, and Macro categories.   ETF Managers GroupOne downside of any analysis on AIEQ, including this one, is that its holdings routinely change. To illustrate, consider the following annual turnover rates for the fund between 2019 and 2023, sourced from AIEQ's annual report:  2019: 129% 2020: 239% 2021: 540% 2022: 1,708% 2023: 2,719%  The increasingly high portfolio turnover indicates the model is \"confused\", for lack of a better word. There's little conviction in the selections, and there is no reason to believe the fund's holdings today will be held next month or even next week. To that extent, any fundamental analysis is limited. However, I have followed the fund's holdings for almost a year, and I have noticed some consistencies, including:  High volatility (monthly standard deviation, five-year beta) Low weighted average market capitalization Weak profitability  These features are typical of speculative funds, while other features like growth and valuation are seemingly random. I'll discuss the fundamentals in more detail shortly, but first, let's examine AIEQ's track record. AIEQ Analysis Performance Track Record Since November 2017, AIEQ has gained 56.82% (7.17% annualized) compared to 118.45% (12.77% annualized) for SPY, a 62% difference. AIEQ's standard deviation was also higher, leading to substantially lower risk-adjusted returns (Sharpe Ratio).   Portfolio VisualizerWhile AIEQ's composition changes frequently, this risky approach only worked well in 2020 when it beat SPY by 7.03% (25.40% vs. 18.37%). Otherwise, returns were disappointing. AIEQ fell 31.90% in 2022 and is also down 4.26% YTD, more than 10% lower than SPY.   Portfolio VisualizerAIEQ's monthly win rate over SPY since November 2017 is only 47% (37/78). However, that figure drops to 43% (33/76) on rolling three-month returns and 38% (28/73) on rolling six-month returns. It seems that the longer you hold AIEQ, the worse the results get. While historical returns are not good indicators of future returns, these results don't suggest AIEQ is worth its 0.75% annual expense. AIEQ Sector Exposures and Top Holdings AIEQ has 22% and 19% allocated to Consumer Discretionary and Technology stocks, our first clue that it's pretty volatile. Its 12% exposure to Energy stocks adds to that volatility, while exposure to defensive sectors like Consumer Staples and Utilities is minimal.   The Sunday InvestorAIEQ Fundamentals By Company The following table highlights selected fundamental metrics for AIEQ's top 25 holdings, totaling 54.32% of the portfolio. As shown, Nvidia (NVDA) is the top holding at 4.67%, followed by BlackRock (BLK), Merck & Co. (MRK), and Norwegian Cruise Line Holdings (NCLH).   The Sunday InvestorThese selections indicate AIEQ takes an all-cap approach, though with few exceptions, most are in the small- and mid-cap segments. Still, AIEQ's weighted average market capitalization is $187 billion, which is above what most large-cap value ETFs feature. Here are four additional observations: 1. AIEQ has a high 1.48 five-year beta, consistent with the higher volatility we saw in the earlier performance results. Nvidia is one contributor, but so are the Consumer Discretionary holdings, which have a 2.11 weighted average five-year beta. This group includes Norwegian Cruise Line Holdings, Tesla (TSLA), and Wayfair (W), all trading closer to their 52-week low prices than their 52-week high prices. 2. AIEQ's gross dividend yield is 1.29%, but the fund's 0.75% expense ratio eats up most of what shareholders receive as income. The ETF's trailing dividend yield is 1.20%, so if the types of selections remain somewhat stable, the yield should decrease. Regardless, due to the unpredictability of its selections and prior history, income isn't a reason to own AIEQ.   Seeking Alpha3. AIEQ has a weighted average 13.71% net income margin and 8.22/10 profit score, calculated using Seeking Alpha Factor Grades. Both these statistics are far worse than SPY and support my assertion that it's more of a speculative product. Additional profitability statistics compared to SPY include:  EBITDA Margin: 26.23% vs. 32.37% EBIT Margin: 19.24% vs. 25.99% FCF Margin: 11.18% vs. 17.19% ROA: 7.45% vs. 12.62% ROE: 19.70% vs. 27.44% ROTC: 9.54% vs. 16.77%  4. AIEQ trades at 24.72x forward earnings using the simple weighted average method and features 10.86% estimated earnings per share growth. This combination is solid compared to SPY and bolstered by reasonably strong diversification at the sub-industry level. Pharmaceuticals is the largest exposure, comprising just 7.45% of the portfolio. Here are the top ten:  Pharmaceuticals: 7.45% Oil & Gas Exploration & Production: 7.25% Semiconductors: 5.91% Asset Management & Custody Banks: 5.87% Hotels, Resorts & Cruise Lines: 5.38% Systems Software: 4.47% Oil & Gas Storage & Transportation: 3.58% Application Software: 3.37% Automobile Manufacturers: 3.36% Homebuilding: 3.16%  This composition differs substantially from August, when Regional Banks led with a 17.51% exposure. I'm pleased with the changes, but they are likely only temporary. As such, it's a difficult fund to analyze. Investment Recommendation  One argument for owning AIEQ is that its AI model can \"learn\" over time, leading to improved returns. However, nearly seven years after its launch, AIEQ has lagged behind SPY by 62%, and its portfolio turnover has skyrocketed to levels I had not seen before. This high turnover is more descriptive of a model that's \"guessing\" rather than \"learning,\" and the 0.75% expense ratio investors pay to essentially become beta testers is unjustified. I believe it's only a matter of time before AIEQ liquidates, so I strongly recommend selling now and deploying your capital into more predictable funds. Thank you for reading, and I look forward to your comments below.","kind":null,"is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"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":"4.29.2","shortVersion":"4.29.2","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/2428547431"}