NANC And KRUZ: Tariffs Are The Wildcard

seekingalpha11-24 22:00

The NANC and KRUZ ETFs supposedly allow retail traders to follow the market-beating trades of Congresspersons like Nancy Pelosi and Ted Cruz.Assuming their allocations remain static, President Trump's...

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}\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\">\nNANC And KRUZ: Tariffs Are The Wildcard\n</h2>\n\n<h4 class=\"meta\">\n\n\n2024-11-24 22:00 GMT+8&nbsp;&nbsp;&nbsp;<a href=https://seekingalpha.com/article/4739851-nanc-and-kruz-tariffs-are-the-wildcard><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>The NANC and KRUZ ETFs supposedly allow retail traders to follow the market-beating trades of Congresspersons like Nancy Pelosi and Ted Cruz.Assuming their allocations remain static, President Trump's...</p>\n\n<a href=\"https://seekingalpha.com/article/4739851-nanc-and-kruz-tariffs-are-the-wildcard\">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":"KRUZ","symbol_name":"Unusual Whales Subversive Republican Trading ETF","start_time":0,"source_url":"https://seekingalpha.com/article/4739851-nanc-and-kruz-tariffs-are-the-wildcard","article_id":"2485179157","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/173558560/image_173558560.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2485179157","pubTimestamp":1732456800,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"The NANC and KRUZ ETFs supposedly allow retail traders to follow the market-beating trades of Congresspersons like Nancy Pelosi and Ted Cruz.Assuming their allocations remain static, President Trump's policies should be more beneficial for / less detrimental to the KRUZ ETF.However, tariffs remain a wildcard, as it is unclear which ETF would be more impacted by potential inflation and economic weakness.   bbraley/E+ via Getty Images  Back in the summer, I wrote an initiation article on the Unusual Whales Subversive Democratic Trading ETF  and the Unusual Whales Subversive Republican Trading ETF . These two ETFs supposedly allow retail traders to mimic the portfolios of Members of Congress like Nancy Pelosi and Ted Cruz, the inspiration for the funds' tickers. In my article, I rated both funds as holds, given their limited operating history and unclear sources of alpha. However, with Republicans sweeping all three branches of government: Executive, Senate, and the House, perhaps it is t","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"KRUZ":"Unusual Whales Subversive Republican Trading ETF","NANC":"UNUSUAL WHALES SUBVERSIVE DEMOCRATIC TRADING ETF"},"translate_title":"NANC和KRUZ：关税是通配符","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"KRUZ":0.9,"NANC":0.9},"content_text":"The NANC and KRUZ ETFs supposedly allow retail traders to follow the market-beating trades of Congresspersons like Nancy Pelosi and Ted Cruz.Assuming their allocations remain static, President Trump's policies should be more beneficial for / less detrimental to the KRUZ ETF.However, tariffs remain a wildcard, as it is unclear which ETF would be more impacted by potential inflation and economic weakness.   bbraley/E+ via Getty Images  Back in the summer, I wrote an initiation article on the Unusual Whales Subversive Democratic Trading ETF (BATS:NANC) and the Unusual Whales Subversive Republican Trading ETF (BATS:KRUZ). These two ETFs supposedly allow retail traders to mimic the portfolios of Members of Congress like Nancy Pelosi and Ted Cruz, the inspiration for the funds' tickers. In my article, I rated both funds as holds, given their limited operating history and unclear sources of alpha. However, with Republicans sweeping all three branches of government: Executive, Senate, and the House, perhaps it is time to revisit the funds to see if KRUZ will start to outperform? In my opinion, there is hope for the KRUZ ETF to outperform the NANC in the coming quarters. For the most part, KRUZ's holdings are domestically focused and should benefit more from President Trump's proposed tax cuts. Trump's healthcare disruptions should also hurt the NANC ETF more, assuming allocations do not change. Overall, I believe KRUZ should relatively outperform. Brief Fund Overviews For those not familiar, the Unusual Whales Subversive Democratic Trading ETF (\"NANC\") and the Unusual Whales Subversive Republican Trading ETF (\"KRUZ\") are actively managed, diversified ETFs that invest based on the public disclosure filings made by sitting members of the United States Congress and/or their families. The NANC ETF captures the investments of Democratic Congresspersons while the KRUZ ETF captures the investments of Republican Congresspersons. The NANC and KRUZ ETFs charge investors 0.75% management fees and have $198 million and $42 million in AUM respectively (Figures 1 and 2).   Figure 1 - NANC overview (subversiveetfs.com)  Figure 2 - KRUZ overview (subversiveetfs.com) Unlike virtually every other country in the world, Members of the United States Congress can actively trade stocks, options, and other financial assets, including securities of companies that may be affected by the outcomes of legislative and executive meetings in which those Congresspersons have direct participation. The only stipulation governing Congress is that Congresspersons and/or their families must disclose their transactions via Periodic Transaction Reports (\"PTRs\") as part of the Stop Trading On Congressional Knowledge Act (\"STOCK Act\"). PTRs are due within 30 days from when a Congressperson or their spouse becomes aware of a transaction, but no later than 45 days from the date of the transaction. The STOCK Act has raised questions of potential insider trading, as some conspiracy theorists allege Congresspersons may use non-public knowledge for personal gain since PTRs do not preclude them from trading. According to an investigative report by Unusual Whales, Congresspersons are very active traders who collectively trade ~$1 billion in stocks annually (Figure 3).   Figure 3 - Are Congresspersons full-time traders and part-time legislators? (unusualwhales.com) Most importantly, Congresspeople appear to be excellent traders, with several members easily trouncing the SPDR S&P 500 ETF Trust (SPY) in 2023 (Figure 4).   Figure 4 - Some Congresspersons have impressive trading records (unusualwhales.com) Using information obtained from PTRs filed in the past 3 years, the NANC and KRUZ ETFs are built with an initial portfolio of 500-600 securities per fund and are updated from the latest PTR filings. Updated Portfolio Holdings Looking at the NANC and KRUZ ETF's portfolio holdings, I see that their overall allocations have remained largely unchanged since the last time I analyzed them in June (Figure 5). NANC remains a technology-heavy fund with 42.0% of its portfolio invested in Technology (vs. 44.7% previously) and 11.7% invested in Communication Services (vs. 11.2% previously). Consumer Cyclicals continue to hold the third spot at 11.5% (vs. 12.1% in June).   Figure 5 - NANC and KRUZ sector allocations, June vs. November 2024 (morningstar.com) On KRUZ's side, we can see the KRUZ ETF has increased its Technology weighting to 24.9% (from 22.3%), but overall, the KRUZ ETF continues to be heavily invested in cyclical sectors like Financial Services (16.2% vs. 15.6% previously), Energy (10.4% vs. 10.5%), and Industrials (14.7% vs. 15.2% previously). What Happens When Congresspersons Win/Lose? One question that has been in the back of my mind ever since I came across the NANC and KRUZ ETFs is what happens when new Congresspersons get elected or are voted out of office? For example, in the most recent election, although the total number of Democratic Congressional seats remained the same at 213, there were some notable winners and losers, including in North Carolina, where Republicans picked up three House seats. How will the NANC ETF treat the portfolio holdings of the departing Democrats Wiley Nickels and Jeff Jackson, and will the portfolios of incoming Republicans Addison McDowell (new seat), Brad Knott, and Tim Moore be added to the KRUZ ETF? Unfortunately, I could not find any mention of how the NANC and KRUZ ETFs will treat election results in the funds' prospectus. Will Republicans And KRUZ Stand To Benefit From Trump? With respect to performance, I have previously commented that the NANC ETF has trounced the returns of the KRUZ ETF, with NANC returning 56.7% since inception compared to KRUZ's 32.0% (Figure 6).   Figure 6 - NANC has trounced KRUZ (Seeking Alpha) This is primarily because the tech-laden NANC ETF has benefited heavily from the strong performance of the 'Magnificent 7' stocks in the past few quarters. With the exception of Tesla (TSLA) and Meta (META), the 'Magnificent 7' stocks are all top-10 weights in the NANC ETF (Figure 7).   Figure 7 - Magnificent 7 are big weights in NANC (subversiveetfs.com) However, moving forward, I believe the KRUZ ETF may stand to benefit more / lose less from President Trump's policies, continuing the nascent outperformance of KRUZ compared to NANC (Figure 8).   Figure 8 - KRUZ has outperformed NANC since election day (Seeking Alpha) Trump Is Tax-Cutter-In-Chief First, if President Trump follows through on his election promise of cutting the corporate tax rate to 15% for companies that produce or operate in the U.S., that could be more beneficial for the KRUZ ETF. This is because by and large, the KRUZ ETF is more heavily exposed to domestically focused companies like banks, industrial companies, and energy producers, while the NANC ETF is more focused on multinational mega-cap companies like NVIDIA (NVDA), Apple (AAPL), and Microsoft (MSFT). For example, if we compare the top 10 holdings of NANC and KRUZ, we can see the median effective tax rate paid by the NANC top-10 companies in their most recent fiscal year is 18.6%, while a similar calculation for KRUZ shows a 20.5% median effective tax rate (incidentally, why does Simon Property Group have a 3% effective tax rate?) (Figure 9).   Figure 9 - NANC top 10 holdings pay lower effective taxes (Author created using data from tikr.com) Repeal Of Affordable Care Act Could Hurt Democrats/NANC Furthermore, another one of President Trump's main campaign pledges is to reform the Affordable Care Act and tackle healthcare spending. To achieve this goal, he has recently appointed Robert F. Kennedy Jr. (\"RFK Jr.\") to be the head of the Health and Human Services Department (\"HHS\"). The HHS encompasses the Federal Drug Administration (\"FDA\"), the Centers for Disease Control (\"CDC\"), Medicare, Medicaid, and a host of other health agencies. Already, healthcare stocks have reacted negatively to the announcement of RFK Jr., and the drubbing should continue if he gets confirmed by the Senate. Given NANC is more heavily weighted towards healthcare stocks (10.3% vs. 7.8% for KRUZ), I expect RFK Jr.'s policies to hurt the NANC ETF more. Drill Baby Drill? On the other hand, President Trump has also pledged to encourage American energy companies to 'drill, baby drill'. Given KRUZ's heavy allocation to energy companies (10.4% vs. 0.1% for NANC), Trump's energy policies could paradoxically end up hurting Republicans and the KRUZ ETF if it leads to a surge in energy production and a collapse in the price of energy commodities. Tariffs Is The Wild Card Finally, the wild card could be President Trump's tariff policies. On the surface, President Trump claims his proposed tariffs (10-20% across the board and 60%+ against Chinese goods) are targeted at foreign countries and companies. However, most economists agree that tariffs are a domestic tax levied on goods as they enter the country and are paid by American companies that import the goods. These companies then pass on the tax to consumers, so in that sense, tariffs will be paid by American consumers (as confirmed by Walmart recently). At the moment, it is unclear whether the negative effects of President Trump's proposed tariffs will hurt the NANC ETF or the KRUZ ETF more. Risks To Analysis Of course, the analysis above assumes the allocations of the NANC and KRUZ ETFs stay roughly static in the coming quarters. If Democratic Congresspersons shift their investments toward those companies that stand to benefit from President Trump's policies and away from those that stand to lose, then the NANC ETF could still outperform the KRUZ ETF. Conclusion Updating my views on the NANC and KRUZ ETF, I believe President Trump's proposed policies could be more beneficial for / less detrimental to the KRUZ ETF relative to the NANC ETF. Assuming current portfolio allocations persist, Trump's proposed tax cuts should help KRUZ more than NANC. Trump's healthcare policies should also hurt NANC more than KRUZ. On the other hand, a push by President Trump to loosen energy regulations could paradoxically increase commodity production and decrease prices, hurting energy companies and the KRUZ ETF. The biggest wildcard is President Trump's tariff policies, which could cause a reacceleration of inflation and crash the U.S. economy. It is unclear which ETF would be hurt more by tariffs. For now, I am leaning to bet on the KRUZ ETF in the coming months, as I believe the domestically focused KRUZ ETF should be the beneficiary of President Trump's policies.  I rate KRUZ a relative buy and NANC a relative sell.","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/2485179157"}