GLIN: India's Year Of The 'GARP'

seekingalpha09-02

NatanaelGinting Few equity markets have compounded capital as consistently as India's. And if fundamentals are anything to go by, there are likely a lot more legs to this rally. Underpinning the long-...

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And if fundamentals are anything to go by, there are likely a lot more legs to this rally. Underpinning the long-...</p>\n\n<a href=\"https://seekingalpha.com/article/4718524-glin-indias-year-of-the-garp\">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":"BK4550","symbol_name":"红杉资本持仓","start_time":0,"source_url":"https://seekingalpha.com/article/4718524-glin-indias-year-of-the-garp","article_id":"2464831701","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/1077457828/image_1077457828.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2464831701","pubTimestamp":1725281616,"sourceInfo":{"source_id":"seekingalpha_fund","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"NatanaelGinting Few equity markets have compounded capital as consistently as India's. And if fundamentals are anything to go by, there are likely a lot more legs to this rally. 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And if fundamentals are anything to go by, there are likely a lot more legs to this rally. Underpinning the long-term upside is the (upward) gravitational pull of >10% nominal GDP growth per year - by far the fastest among the major global economies. And in the near term, most indicators, notwithstanding a one-off hit to last quarter's GDP from election-driven government capex delays and intense heatwaves, are firmly in the green. Edelweiss Still, there are valuation concerns; and at first glance, justifiably so, given where earnings multiples are relative to historical levels. While I'd contend that there's more than adequate room for stocks to grow into their multiples over time, investors looking to play it safe should continue to find a lot to like with the more discerning VanEck India Growth Leaders ETF (NYSEARCA:GLIN). After all, GLIN's \"growth at a reasonable price\" ('GARP') style consistently yields a portfolio with both lower headline valuation multiples and higher earnings growth. Perhaps most importantly, GLIN's approach has also translated into some very impressive returns - especially this year. In line with my prior coverage (see GLIN: A Unique Approach To Investing In India) and ahead of this month's big rebalance, I continue to rate GLIN highly. Data by YCharts GLIN Overview - India's 'GARP' ETF Within the India factor ETF universe, GLIN, in its post-2020 incarnation stands apart. Unlike the more straightforward profitability filter used by 'all-cap' alternative, the WisdomTree India Earnings Fund ETF (EPI), GLIN incorporates a fairly complex multifactor approach to its stock selection with the ultimate goal of replicating a 'GARP' strategy. More specifically, the fund, via its index provider, MarketGrader, runs eligible securities through a 24-metric screen; in order of importance, these include 'Growth' (top and bottom lines), 'Value' (forward multiples), and 'Quality' (profitability and cash generation). VanEck This more comprehensive approach naturally comes with higher fees; excluding waivers, GLIN's ~1.1% gross expense ratio is the highest of the three US-listed India factor ETFs. Liquidity isn't great either - at a ~57bps bid/ask, GLIN has much wider spreads than best-in-class EPI (~2bps) and Invesco India ETF (PIN) (~27bps). As GLIN is a much smaller and less established fund, this cost (fees + execution) tradeoff isn't likely to change anytime soon. In essence, the key here is underwriting 'GARP' outperformance over and above the added costs associated with investing in the fund; those willing to do so should find plenty to like here.     Expense Ratio Bid/Ask Spread   VanEck India Growth Leaders ETF 1.09% (0.87% net) 0.57%   WisdomTree India Earnings Fund 0.87% 0.02%   Invesco India ETF 0.78% 0.27%   Click to enlarge Sources: WisdomTree, VanEck, Invesco GLIN Portfolio - Striking the Right Balance As of latest reporting, GLIN's sector breakdown remains mostly status quo. Much like the other Indian ETFs, Financials is the largest exposure, albeit at a slightly reduced 28.9%. Information Technology is the biggest gainer this time around, rising to 21.5% of the portfolio after a sector-wide rally in recent months. The other key sector allocations, Industrials (11.0%), Consumer Discretionary (10.4%), and Health Care (8.8%), are broadly unchanged. VanEck As for the 80 single-stock holdings in GLIN's portfolio, there has been some reshuffling. While the largest holding remains Bajaj Auto (unchanged at 5.6%), Infosys Limited (INFY) is now a much larger holding at 5.3%. Of note, both are the only stocks over the 5% cap. Elsewhere, notable movers include non-bank finance company Shriram Finance (up to ~5.0%) and India's other big IT services name, Tata Consultancy Services (up to 4.9%). VanEck More broadly, GLIN maintains quite a bit of small/mid-cap exposure. While VanEck currently lists the large to small/mid-cap split as 82.6%/17.4%, it uses a different market cap threshold to key comparable EPI; normalizing for this difference shows that GLIN does lean a lot closer toward small/mid-caps than headline numbers suggest. VanEck Also notable is that GLIN's stock selection process strikes a nice balance between growth and valuation multiples (hence the 'GARP' strategy). Yes, there are plenty of state-owned companies and cyclicals here - both categories that (deservedly) trade at lower multiples through the cycles. Still, GLIN's underlying fundamentals make for impressive reading, from average earnings growth rates in the low-double-digits % to returns on equity in the >20% range. Match this with a portfolio P/E (~23x forward) multiple turns lower than most other Indian ETFs, and it's perhaps not too surprising that GLIN has been this year's India ETF outperformer.   GLIN Key Metrics     Forward P/E Ratio 22.8   Avg. EPS Growth - 1 Yr. 25.0%   Avg. EPS Growth - 3 Yr. 41.8%   Avg. Return on Equity 20.6%   Click to enlarge Source: MarketGrader GLIN Performance - 'GARP' is Back in Favor As I've highlighted previously, GLIN is a lot more active when it comes to managing its portfolio. This makes its relative performance a lot more unpredictable than your average conventional or factor ETF - both of which typically come with much less portfolio churn. In line with this view, GLIN's track record has been relatively inconsistent, fluctuating between periods of underperformance and, more recently, outperformance. Case in point - while the one-year NAV return of +43.6% is now well ahead of EPI (+36.7%) and PIN (+31.3%), GLIN's +10.6% annualized three-year return continues to lag both EPI (+15.8%) and PIN (+12.9%) by a fair margin. VanEck What has been consistent about GLIN, though, is its relatively narrow tracking error (by Indian factor ETF standards) to the benchmark MarketGrader India All Cap Growth Leaders Index. Yes, GLIN charges higher fees and did still lose over five percentage points to its index over the last year. But compared to factor ETF alternatives EPI (one-year tracking error of over nine percentage points) and PIN (almost eight percentage points), GLIN has done remarkably well. Expect these tracking errors to widen further now that capital gains and securities transaction taxes (key drivers of Indian ETF tracking errors) have been hiked. Against this more challenging backdrop for index funds, GLIN's tracking error 'edge' could be an invaluable source of outperformance in the mid to longer term. VanEck As for the near term, this month's rebalancing event will be key to gauging where performance goes from here. Note that this has historically been a big portfolio churn event - the last one in March saw twenty-two single-stock changes (out of a nearly 80-stock portfolio). Having seen many of its holdings run-up in recent months, expect a bit of reshuffling this time around as well. Either way, I would keep a close eye not just on GLIN's new portfolio makeup but also on where the headline fundamental and valuation metrics shake out post-rebalance.   Rebalance Date Companies Replaced   March 2024 22   March 2023 43   Click to enlarge Source: MarketGrader Summing Up  India may be one of, if not the hottest, equity markets in the world right now, but the recent rally has no doubt resulted in pockets of richness within the equity universe. For investors looking to \"sidestep\" these valuation concerns while avoiding the heftier fees associated with an active manager, a 'GARP' ETF like GLIN is a very worthy consideration. Yes, the upcoming rebalance does inject some uncertainty, but investors willing to underwrite a selection process that has consistently balanced higher-than-average earnings growth with lower-than-average multiples stand to be well-rewarded.","kind":"highlight","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":"4.29.3","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/2464831701"}