JMEE: Actively Managed ETF In Line With Its Objective

seekingalpha10-05

The JPMorgan Market Expansion Enhanced Equity ETF aims to outperform the S&P 1000 index and has achieved this.JMEE is well-diversified across sectors and holdings, and fundamentals show a tilt to ...

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It has 580 holdings, a 30-day SEC yield of 1.21% and a net expense ratio of 0.24%. JMEE is “Designed to provide returns that exceed the performance of the S&P 1000 Index”, a mid- and small-cap index grouping S&P 400 and S&P 600 constituents. As there is no S&P 1000 ETF, this article will use both indexes as benchmarks, represented by iShares Core S&P Mid-Cap ETF (IJH) and iShares Core S&P Small-Cap ETF (IJR). The mid-cap index has a total market cap about $3,095 billion and the small cap index about $1,456 billion (so mid-caps represent about 67% of the S&P 1000). As described in the prospectus by JPMorgan, the methodology ranks S&P 1000 stocks “based on company financials, data science techniques, and proprietary fundamental analysis”. The fund buys stocks that have a higher rank in their sector, and sells those with a falling rank, or becoming “unattractive”, or excluded from the S&P 1000 Index. The portfolio turnover rate in the most recent fiscal year was 29%. Portfolio The fund invests almost exclusively in U.S. companies (over 98% of asset value). The portfolio is well-diversified across a few sectors, with a focus on industrials (22.1%), financials (17.7%) and consumer discretionary (14.9%). Other sectors are below 10%. Compared to IJH and IJR, JMEE moderately underweights technology and healthcare. Sector breakdown (Chart: author; data: JPMorgan, iShares) The portfolio is also well-diversified across holdings, and risks related to individual companies are low. Indeed, the top 10 issuers, listed in the next table, represent only 7% of asset value, and the heaviest position weighs about 1%.   Ticker Name Sector Industry Weight   UTHR UNITED THERAPEUTICS CORP Health Care Biotechnology 0.98%   EME EMCOR GROUP INC COMMON Industrials Construction & Engineering 0.78%   COHR COHERENT CORP COMMON Information Technology Electronic Equipment, Instruments & Components 0.71%   THC TENET HEALTHCARE CORP Health Care Health Care Providers & Services 0.70%   CSL CARLISLE COS INC COMMON Industrials Building Products 0.68%   CACI CACI INTERNATIONAL INC Industrials Professional Services 0.68%   EXEL EXELIXIS INC COMMON Health Care Biotechnology 0.64%   PSTG PURE STORAGE INC COMMON Information Technology Computers & Peripherals 0.62%   ACM AECOM COMMON STOCK USD Industrials Construction & Engineering 0.60%   RS RELIANCE INC COMMON Materials Metals & Mining 0.59%   Click to enlarge Fundamentals JMEE valuation ratios and cash flow growth are between IJH and IJR values. However, it has slightly better earnings growth and sales growth rates. Although it is classified by Fidelity in the “Small Blend” category and its strategy description is unclear, the JPMorgan fund seems to have a tilt to growth style.     JMEE IJH IJR   P/E TTM 17.95 19.56 17.52   Price/Book 2.26 2.56 1.84   Price/Sales 1.28 1.49 1.06   Price/Cash Flow 11.11 12 9.33   Earnings growth 21.35% 18.93% 18.30%   Sales growth % 8.02% 7.66% 5.71%   Cash flow growth % 9.30% 10.16% 8.65%   Click to enlarge Data source: Fidelity Performance JMEE is on par with IJH and beats IJR by about 10% in total return since it was listed as an ETF. Anyway, the active fund beats the capital-weighted underlying indexes in a 67/33 proportion. Therefore, it has reached its objective of outperforming the S&P 1000. JMEE vs IJH, IJR since 5/9/2022 (Seeking Alpha) Competitors Due to the relative weights of the S&P 400 and S&P 600 indexes, JMEE investing universe is heavier in mid-caps than small-caps. The next table compares characteristics of JMEE and five popular mid-cap ETFs implementing various investing styles:  John Hancock Multifactor Mid Cap ETF (JHMM) WisdomTree U.S. MidCap Dividend Fund (DON) SPDR S&P 400 Mid Cap Growth ETF (MDYG) SPDR S&P 400 Mid Cap Value ETF (MDYV) Invesco S&P MidCap Momentum ETF (XMMO)      JMEE JHMM DON MDYG MDYV XMMO   Listed on 5/6/2022 9/28/2015 6/16/2006 11/8/2005 11/8/2005 3/3/2005   Expense Ratio 0.24% 0.42% 0.38% 0.15% 0.15% 0.34%   AUM $1.37B $4.00B $3.71B $2.68B $2.63B $2.46B   Avg Daily Volume $5.70M $10.51M $6.46M $12.58M $8.40M $50.29M   Holdings 580 668 330 254 292 80   Top 10 6.97% 4.64% 10.58% 11.82% 10.89% 27.37%   Turnover 26.00% 14.00% 26.00% 51.00% 41.00% 132.00%   Click to enlarge JMEE is the smallest and least liquid of these funds. Its expense ratio is reasonable compared to peers, especially for an actively managed ETF. The next chart plots total returns since its listing date. The momentum and growth ETFs XMMO and MDYG are leading, but this time frame is too short to assess the long-term potential of these funds. JMEE also lags the multifactor ETF JHMM. JMEE vs competitors, since 5/9/2022 (Seeking Alpha) Takeaway  JPMorgan Market Expansion Enhanced Equity ETF is an actively managed ETF intending to beat the S&P 1000 index, and its return is in line with its objective. JMEE is well-diversified across sectors and holdings and fundamentals show a tilt to growth without sacrificing value. Some mid-cap ETFs have outperformed JMEE since May 2022, but a longer track record will be necessary to make a relative assessment.","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":"analysis","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/2473925656"}