BBLU: An Active Blue-Chip Strategy Worth Considering

seekingalpha08-12

BBLU is actively managed, with a focus on top-quality blue chips. It can ignore certain sectors. At this point, there are no materials, real estate, or utilities in its portfolio.Since being converted...

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At this point, there are no materials, real estate, or utilities in its portfolio.Since being converted...</p>\n\n<a href=\"https://seekingalpha.com/article/4713689-bblu-active-blue-chip-etf-strategy-worth-considering\">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>BBLU: An Active Blue-Chip Strategy Worth Considering</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\">\nBBLU: An Active Blue-Chip Strategy Worth Considering\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-08-12 21:30 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4713689-bblu-active-blue-chip-etf-strategy-worth-considering><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>BBLU is actively managed, with a focus on top-quality blue chips. It can ignore certain sectors. At this point, there are no materials, real estate, or utilities in its portfolio.Since being converted...</p>\n\n<a href=\"https://seekingalpha.com/article/4713689-bblu-active-blue-chip-etf-strategy-worth-considering\">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":"LU0976567544.SGD","symbol_name":"FTIF - Templeton Global Income A Mdis SGD-H1","start_time":0,"source_url":"https://seekingalpha.com/article/4713689-bblu-active-blue-chip-etf-strategy-worth-considering","article_id":"2458041983","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1391412129/image_1391412129.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2458041983","pubTimestamp":1723469457,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Under normal circumstances, the Fund invests at least 80% of its net assets  in blue-chip stocks as determined at the time of purchase. 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BBLU is not very active when it comes to rotation out of losers and to winners, as its","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"LU0976567544.SGD":"FTIF - Templeton Global Income A Mdis SGD-H1","IE00B19Z8W00.USD":"FTGF CLEARBRIDGE US LARGE CAP GROWTH \"A\" INC","LU1668664300.SGD":"Blackrock World Financials A2 SGD-H","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","SPY":"标普500ETF","BK4512":"苹果概念","IE00B775SV38.USD":"NEUBERGER BERMAN US MULTICAP OPPORTUNITIES \"A\" (USD) ACC","FDN":"First Trust Dow Jones Internet I",".SPX":"S&P 500 Index","OEX":"标普100","BK4514":"搜索引擎","GOOG":"谷歌","SDS":"两倍做空标普500ETF","IE00BJJMRX11.SGD":"Janus Henderson Balanced A Acc SGD","AAPL":"苹果","LU0642271901.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD-H","LU0079474960.USD":"联博美国增长基金A","OEF":"标普100指数ETF-iShares","GOOGL":"谷歌A","BK4516":"特朗普概念","BK4554":"元宇宙及AR概念","BK4515":"5G概念","LU0640476718.USD":"THREADNEEDLE (LUX) US CONTRARIAN CORE EQ \"AU\" (USD) ACC","LU0048584097.USD":"FIDELITY FUNDS  GLOBAL THEMATIC OPPORTUNITIES \"A\" (USD) INC","IE00BJJMRY28.SGD":"Janus Henderson Balanced A Inc SGD","BK4553":"喜马拉雅资本持仓","VOO":"Vanguard标普500ETF","LU1084165304.USD":"FIDELITY WORLD \"A\" (USD) ACC","LU0081259029.USD":"UBS (LUX) EQUITY FUND - TECH OPPORTUNITY \"P\" (USD) ACC","LU0158827781.USD":" ALLIANZ GLOBAL SUSTAINABILITY \"AT\" (USD) ACC","MGC":"Vanguard Mega Cap ETF","BBLU":"EA BRIDGEWAY BLUE CHIP ETF","INTC":"英特尔","SH":"标普500反向ETF","IE0004445015.USD":"JANUS HENDERSON BALANCED \"A2\" (USD) ACC","BK4566":"资本集团","LU":"陆金所","LU0320765489.SGD":"FTIF - Franklin Mutual US Value A Acc SGD","IVV":"标普500指数ETF","SSO":"两倍做多标普500ETF","BK4559":"巴菲特持仓","IE00B19Z8X17.USD":"FTGF CLEARBRIDGE US LARGE CAP GROWTH  \"AG\" (USD) ACC","JPM":"摩根大通","SPXU":"三倍做空标普500ETF","LU0861579265.USD":"联博低波幅策略股票基金A","LU0225283273.USD":"SCHRODER ISF GLOBAL EQUITY ALPHA \"A\" (USD) ACC","BK4550":"红杉资本持仓","IE000YTNTUN2.SGD":"PIMCO BALANCED INCOME AND GROWTH \"M\" (SGDHDG)INC"},"translate_title":"BBLU：值得考虑的积极蓝筹策略","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"AAPL":1,"BBLU":1,"MGC":1,"GOOGL":1,"GOOG":1,"VOO":0.9,"SPY":0.9,"FDN":0.9,"JPM":0.8,"INTC":0.8,"OEF":0.6,"OEX":0.6,"SDS":0.6,"SH":0.6,"SPXU":0.6,"SSO":0.6,".SPX":0.6,"ESmain":0.6,"IVV":0.6,"LU":0.6},"content_text":"BBLU is actively managed, with a focus on top-quality blue chips. It can ignore certain sectors. At this point, there are no materials, real estate, or utilities in its portfolio.Since being converted into an ETF in October 2022, BBLU has outperformed the iShares Core S&P 500 ETF (IVV) in 14 months out of 19. It has also delivered stronger risk-adjusted returns compared to QQQ.The current version of the portfolio has 37 stocks. Capturing about 50% of IVV's portfolio, it has stronger quality and a higher adjusted earnings yield.BBLU's factor mix, performance track record, and slim expense ratio are supportive of a Buy rating.Risks and disadvantages include its relatively small AUM as well as a possible change in market sentiment that might be triggered by more signs of a looming recession.   Richard Drury Continuing to broaden my coverage of exchange-traded funds that utilize peculiar equity strategies with concentrated portfolios, today I would like to discuss the EA Bridgeway Blue Chip ETF (NYSEARCA:BBLU), an active, mega-caps-oriented fund holding just 37 stocks at this juncture. First, since its conversion into an ETF in October 2022, it has confidently outperformed the iShares Core S&P 500 ETF (IVV). Second, it has a stronger quality profile than IVV, with something to appreciate in terms of valuation. There are nuances when it comes to growth, and I will give them due attention below in the note. And third, for an actively managed vehicle, its expense ratio is wafer-thin at just 15 bps. There are risks, with its comparatively small AUM being the major one, but overall, I believe BBLU deserves a Buy rating. BBLU investment strategy: high-conviction concentrated approach  Launched in July 1997, BBLU was converted into an ETF in October 2022. From its website, we know that its objective is to provide long-term total return on capital, primarily through capital appreciation, but also some income.  How is the fund supposed to achieve that? Under normal circumstances, the Fund invests at least 80% of its net assets (plus borrowings for investment purposes) in blue-chip stocks as determined at the time of purchase. For purposes of the Fund’s investments, Bridgeway considers “blue-chip stocks” to be stocks issued by the largest 150 US companies as defined by market capitalization. These stocks tend to be well-known and established companies.  In the prospectus, it is said that stocks are selected using a model-driven statistical approach. The statistical approach was developed utilizing academic theory and incorporates logic, data, and evidence. The result is \"a portfolio of approximately 35 securities.\" Tobacco companies cannot qualify. It is important to note that the strategy includes an ESG ingredient but as ESG information is just one investment consideration, ESG considerations are not solely determinative in any investment decision made by the Sub-Adviser.  BBLU is not very active when it comes to rotation out of losers and to winners, as its turnover is just 12%, implying that only modest adjustments were made to the portfolio in the most recent fiscal year. And I see no arguments why this should change in the future. BBLU performance: meaningful alpha since conversion I would like to address BBLU's performance before and after the conversion to an ETF separately, with the reason for that being data availability. First, since the conversion, the fund has been a massive success. Over 19 full months (November 2022–July 2024), it underperformed IVV only in five. As a consequence, it consistently beat the iShares ETF in 2022–2024. So it seems it was perfectly prepared for the growth rotation that has been dominating the narrative since the market exited bear territory.   BBLU's % outperformance (Created by the author using data from Portfolio Visualizer) Second, its annualized return over the period concerned is 3.8% higher than that of IVV, while its standard deviation was 85 bps lower. Here, it is worth emphasizing that concentrated portfolios tend to be significantly more volatile than those that have a greater depth of exposure, but BBLU's example illustrates that maintaining a minimalist portfolio with lower volatility is doable.    Metric BBLU IVV MGC OEF QQQ   Start Balance $10,000 $10,000 $10,000 $10,000 $10,000   End Balance $15,443 $14,651 $15,128 $15,619 $17,156   CAGR 28.19% 24.39% 26.69% 29.02% 36.13%   Standard Deviation 13.32% 14.17% 14.05% 14.29% 18.81%   Best Year 31.13% 26.32% 29.77% 32.72% 54.85%   Worst Year 0.20% -0.50% -1.03% -1.41% -3.97%   Maximum Drawdown -6.92% -8.32% -7.41% -7.45% -9.01%   Sharpe Ratio 1.57 1.27 1.41 1.52 1.48   Sortino Ratio 3.03 2.34 2.64 2.86 2.95   Benchmark Correlation 0.99 1 0.99 0.98 0.89   Upside Capture 103.48% 100% 104.12% 110.26% 136.64%   Downside Capture 84.31% 100% 94.94% 94.26% 107.83%   Click to enlarge Data from Portfolio Visualizer. The ETFs were benchmarked against IVV For better context, I have added the Invesco QQQ Trust ETF (QQQ), the Vanguard Mega Cap Index Fund ETF Shares (MGC), and the iShares S&P 100 ETF (OEF). BBLU outperformed MGC with ease but failed to keep pace with QQQ and OEF. But there is a nuance here. Thanks to its lower volatility, it has delivered the strongest risk-adjusted returns (the Sharpe and Sortino ratios in the table above) in the group. Meanwhile, its downside capture ratio was the smallest. Regarding performance since its inception in July 1997, the information that can be obtained from documents on BBLU's website shows that its returns over that period were also solid. For instance, the most recent factsheet shows that BBLU's average annual market price return since inception was 8.84%, compared to 8.68% delivered by the S&P 500 index. Though the difference is tiny, assuming such a long period of time, this is a result worth appreciating. BBLU vs. IVV: dissecting factor stories In my articles discussing ETFs that leverage sophisticated equity strategies with the goal of outmaneuvering the market, I usually ask one essential question: are their factor propositions stronger than that of IVV? Regarding BBLU, I would say that it has superior quality (with nuances) and slightly stronger value characteristics. Growth is much weaker though. Let me elaborate on that below. As of August 9, BBLU held 37 stocks (including both share classes of Alphabet, (GOOG) and (GOOGL)), with all of them being S&P 500 constituents. But what is interesting is that in IVV, they are not a minority. Combined, they account for about 50.9% of its net assets, so their performance impacts the ETF's price direction substantially. BBLU has exposure to all the trillion-dollar companies, with the most expensive being Apple (AAPL), with its market cap of $3.29 trillion. The least expensive name in this basket is Intel (INTC), with its market cap of $87.6 billion, as it has recently exited the mega-cap league following the sell-off triggered by its disastrous results presented earlier this August. Other stocks that cannot qualify for mega-cap status (less than $100 billion in market cap) are absent. Unlike the S&P 500 ETF, BBLU is not supposed to offer exposure to all 11 GICS sectors, so as it apparently sees no opportunities in materials, real estate, and utilities, it has simply ignored them. It is also worth noting that, compared to IVV, BBLU is a bit more skeptical about IT, while it is more bullish on communication and consumer staples, among others.   Created by the author using data from the ETFs Value and growth BBLU's portfolio has a much smaller weighted-average market cap than that of IVV, which is surprising as the latter has exposure to mid-caps but BBLU has not.        Metric IVV BBLU   Market Cap $905.26 billion $766.48 billion   P/S 7.73 6.92   EPS Fwd 17.15% 12.68%   Revenue Fwd 11.40% 8.96%   EBITDA Fwd 18.61% 12.92%   EV/EBITDA 22.48 19.04   Adjusted EY 3.82% 4.40%   Quant Valuation B- or higher 6.86% 12.42%   Quant Valuation D+ or lower 80.47% 77.47%   Quant Growth B- or higher 38.3% 36.93%   Quant Growth D+ or lower 35.39% 46.8%   Click to enlarge Calculated by the author using data from Seeking Alpha and the ETFs At the same time, its Price/Sales ratio is slightly more comfortable, while the adjusted earnings yield is higher (profitless companies were ignored). Its allocation to companies with a B- Quant Valuation rating or better is almost 2x larger than that of IVV. However, on the growth front, it is weaker than the S&P 500 ETF; for instance, its weighted-average forward growth rates are notably lower. Quality BBLU has almost perfect quality. It is no coincidence that I decided to compare allocations to stocks with an A+ Quant Profitability grade or higher. The reason is that there is just one company in the BBLU portfolio with a weaker rating, JPMorgan Chase & Co. (JPM).        Metric IVV BBLU   Quant Profitability A+ 72.7% 95.6%   ROA 13.94% 12.53%   Adjusted ROE 20.42% 20.10%   Click to enlarge Calculated by the author using data from Seeking Alpha and the ETFs. ROE was adjusted for negative and over-100% figures. However, capital efficiency ratios are a bit weaker though. Momentum and volatility In the BBLU portfolio, momentum stocks are aplenty, but IVV nonetheless has significantly larger exposure to them.        Metric IVV BBLU   Quant Momentum B- or higher 80.66% 69.70%   24M Beta 1.058 0.904    60M Beta 1.049  0.948    Click to enlarge Calculated by the author using data from Seeking Alpha and the ETFs  At the same time, BBLU's weighted-average beta coefficients show it is a bit less volatile than the market. Final thoughts BBLU does not venture outside of mega-caps (almost, as after its recent rout, INTC is the only exception at the moment). It picks the worthiest, most established, and most promising companies from that league. Its performance since the conversion is almost flawless, as it has captured less downside and more upside than IVV. Besides, BBLU has delivered stronger risk-adjusted returns than QQQ, MGC, and OEF. Of course, there are risks. The one to consider carefully is assets under management of only about $191 million. Data by YCharts Trends in AUM have not been very exciting since the conversion, as for most of 2023, it was hovering around the $120 million mark. On the positive side, the ETF is rather liquid. Besides, there is a risk that growthier bellwethers will surprise on the downside if a new piece of economic data reinforces the case for a recession.  Overall, with due attention paid to the risks and disadvantages, I believe BBLU deserves a Buy rating.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"1","news_tag":"","news_rank":0,"symbols":[],"gpt_button":0},"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":"4.29.3","shortVersion":"4.29.3","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/2458041983"}