Study after study has shown that picking stocks that turn out to be winners is an exceedingly difficult task, with very little consistency in performance over time. Thus, the common refrain of "Past results are no indication of future returns". But what if instead of trying to pick likely winners, you instead screen out the potential losers from your portfolio?
GraniteShares Founder and CEO Will Rhind had just this thought, which he decided to put into action late last year. He rejoins Let's Talk ETFs to discuss his firm's newest strategy, The GraniteShares X-OUT U.S. Large Cap ETF (XOUT). XOUT takes the largest 500 U.S. companies by market cap and runs them through a series of screens meant to single out companies demonstrating the least adaptability in the current age of technological disruption. The bottom 250 U.S. large cap stocks are thus removed from XOUT's portfolio, with the screen re-run and the portfolio rebalanced quarterly. And while past results are certainly no guarantee of future results, the fund has garnered strong investor interest out of the gate.
Show Notes

3:15 - What's the basic underlying strategy of the fund?

6:15 - How is the index constructed? How do you exclude the losers?

9:00 - How did you arrive at your 7 selection criteria?

11:00 - Why do you reshuffle the index quarterly?

12:30 - Story behind the design of the strategy

17:15 - Will this strategy be able to predict a shift from growth to value?

21:30 - Sector weighting. Does the overweight on healthcare and IT cause any concerns?

27:30 - Why aren't Verizon and AT&T included? 

31:30 - How does the exclusion of some financial services companies reflect on the industry? 

34:30 - "Fun" pairs trades of rivals based on which is in and out of the index: Coke vs. Pepsi, Visa vs. Mastercard, Walmart vs. Costco, State Street vs. BlackRock

36:30 - Why a large position in QQQ?

38:45 - Strategy behind HIPS ETF

44:45 - What's the rate risk with HIPS?


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