TK Journal 2021-05-20

Hi every­one,
Fol­low­ing on from a cou­ple of past ques­tions about whether QAV was use­ful for analysing ETF’s, I have under­tak­en some analy­sis and have decid­ed to exclude ETF’s, LIC’s and Man­aged Funds from the QAV process.

I do this for 2 rea­sons. First­ly, the oper­at­ing cash­flow line for these list­ed enti­ties (par­tic­u­lar­ly) ETF’s is often can­celled out by the financ­ing cash­flow line in the cash­flow state­ment. There are some cas­es where Geared ETF’s and inter­na­tion­al ETF’s have small net cash move­ments due to cur­ren­cy and gear­ing, but in the main, there is zero net cash­flow. 

See this exam­ple from GGUS:

LIC’s can be a lit­tle more con­vo­lut­ed as they can raise new mon­ey from clients as well as run their profits/losses, div­i­dends and gear­ing through their cash flow state­ment, but they appear to be dom­i­nat­ed by receipts from cus­tomers and pay­ment to sup­pli­ers.

The sec­ond rea­son for remov­ing list­ed funds from the QAV list is that in a lot of cas­es they are only pro­duc­ing index like returns. I went back to a Top Scor­ers list from last year and checked on the return if the list was bought and held. Over­all the total list pro­duced a return of 30%, but the list­ed ETF’s and Funds returned only 9%. Look­ing at the ETF’s and funds on the Top Scorer’s list at that time, they are a way of invest­ing in var­i­ous over­seas coun­tries. EG HJPN, GGUS, ESTX, etc. There were some funds that were active­ly man­aged, eg MFF, how­ev­er, they did not per­form well. Which begs the ques­tions, if QAV per­forms at twice mar­ket, why invest in anoth­er active manager’s fund that has such a high bar to beat?

I will there­fore make a change to the QAV fil­ter in Stock Doc­tor. The “Include Unclas­si­fied” but­ton in the GICS clas­si­fi­ca­tion sec­tion of the fil­ter will be unclicked to remove ETF’s. This will not exlude all list­ed funds from our down­loads, as some are clas­si­fied as Diver­si­fied Finan­cials and these will have to be fil­tered out man­u­al­ly until I find a bet­ter way of catch­ing them. MFF is in the Diver­si­fied Finan­cials cat­e­go­ry, which we want to exclude, but ECX is also in the Diver­si­fied Finan­cials cat­e­go­ry, so that GICS cat­e­go­ry must remain in our fil­ter.

Here is a screen shot show­ing where to unclick:

Don’t for­get to save the fil­ter after unclick­ing this box.

We can talk about this in our next show.

Regards,
Tony