The firm’s six existing funds follow the so-called revenue-weighted model with different tweaks. For example, the RevenueShares Large Cap Fund (RWL) takes the S&P 500 Index and re-weights the constituents by their respective revenues. So instead of Apple Inc (the largest US company by market-cap), Wal-Mart Stores Inc captures top spot in the fundamentally-weighted ETF.
The recently-launched RGRO focuses on developed and emerging markets and seeks to maximize returns by investing in the fastest growing companies in the fastest growing countries, i.e. it uses a GDP screen to find countries that have increasing revenues.
The new fund then selects countries that have the best year-on-year GDP percentage growth in the prior two quarters. The top five developed and top five emerging-market countries are then equally-weighted (10 percent each) from the wide universe of the Standard & Poor’s Global Broad Market Index.
The revenue screen is put next to target quality companies that have growing revenues and are trading at attractive prices because the company firmly believes the purchase price of a particular stock matters.
The end result is a well-diversified basket of about 95 global stocks that have an attractive price-to-sales ratio. RGRO has a price-to-sales ratio of 0.3, which is lower than the MSCI EAFE Index and the MSCI Emerging Markets Index – both of which have a price-to-sales ratio of more than 0.9, indicating the underlying portfolio is undervalued. The fund’s overall P/E ratio is 22.35. RGRO is rebalanced every quarter to reflect the latest revenue data.
On the downside, the fund is exposed to currency risk as the underlying portfolio holds assets denominated in a number of currencies.
The fund has an annual expense ratio of 0.7 percent.
Disclosure: No holdingsContact Ulli