Insights
“Nobody Ever Got Fired for Buying Vanguard..." Well, Maybe They Should Be?
“Nobody ever got fired for buying IBM”. This phrase’s etymology comes from the computing era’s early days when technology was beginning to change the corporate landscape. It reflected one of the career risks of that day…and, by extension, a way to avoid it. First, let’s be clear: Long-time readers know we love Vanguard. John Bogle was a national treasure, and Cambria owns Vanguard ETFs across our lines of business. Vanguard has revolutionized the asset management industry more than any other fund company, saving investors billions of dollars in higher fees. And investors have voted with their dollars. We often say that Vanguard sets the bar for where an investor should start their investing journey. So, with all the laurels we’ve just bestowed upon Vanguard, what’s up with the title of this article?
T-Bills and Chill... Most of the Time
Cambria attempts to illustrate the effectiveness of implementing a tactical approach to fixed income investing based on the evaluation of yield spreads across a variety of fixed income sectors. Cambria believes the power of yield spreads are in its ability to guide investors over time based on objective rules that have historically shown the ability to earn potentially higher returns than a simple buy-and-hold approach, but with lower volatility and drawdowns.
A Better Approach to Dividend Investing
Over a decade ago our CEO Meb Faber wrote his book Shareholder Yield: A Better Approach to Dividend Investing. The basic thesis was that due to a structural shift in markets, companies altered how they distributed their cash to investors. While a majority of companies used to return cash to shareholders predominantly via cash dividends, starting in the 1990s companies shifted to only distributing a minority of their cash through dividends. What took their place?
Think Income and Growth Don’t Exist Around the Globe? Think Again
The power of shareholder yield is not limited by geography. Neither is the need for an attractive yield at a reasonable valuation.
In this paper, we explore Cambria Foreign Shareholder Yield ETF (FYLD) and Cambria Emerging Shareholder Yield ETF (EYLD), and how investors can get exposure to quality value stocks that have returned the most cash to shareholders via dividends and buybacks in foreign and emerging markets.
Think Income and Growth Don’t Exist in This Market? Think Again.
In this paper, we explore Cambria Shareholder Yield ETF (SYLD) and how investors can get exposure to quality value stocks that have returned the most cash to shareholders via dividends and buybacks relative to the rest of the U.S. stock universe.
Decade of Shareholder Yield
After 10 years of shareholder yield investing, we explore how focusing on companies with high cash distribution (dividends, buybacks and net debt paydown) has performed.
The Liquidity Myths on ETFs
Perhaps the most common ETF misconception is that low daily trading volumes or small amounts of assets under management (AUM) indicate that an ETF is illiquid. The reality however is that ETFs function fundamentally different than individual stocks or closed-end funds.
Unlike individual stocks or closed-end funds, which usually have a fixed supply of shares in circulation on the secondary market, ETFs are open-ended investment vehicles. This means that ETFs are able to issue or withdraw shares on the secondary market according to investor supply and demand, otherwise known as creations and redemptions. This ability gives ETFs a unique liquidity profile in comparison with stocks and closed-end funds.
The ETF Edge
The key to understanding how ETFs work is the ‘creation / redemption’ process. It’s how ETFs gain exposure to the market, and is the secret sauce that allows ETFs to be less expensive, more liquid and more tax efficient than traditional mutual funds. It’s complicated, but worth understanding.
To determine if a Fund is an appropriate investment for you, carefully consider the Fund’s investment objectives, risk factors, charges and expenses before investing. This and other information can be found in the Fund’s prospectus which may be obtained by calling 855-383-4636 (ETF INFO) or visiting our website at www.cambriafunds.com. Read the prospectus carefully before investing or sending money.
The Cambria ETFs are distributed by ALPS Distributors Inc., 1290 Broadway, Suite 1000, Denver, CO 80203, which is not affiliated with Cambria Investment Management, LP, the Investment Adviser for the Fund.
Investing involves risk, including potential loss of capital.
MYLD and LYLD are new funds and have limited operating histories. There is no guarantee that a Fund will achieve its investment goal. Investing involves risk, including the possible loss of principal. High yielding stocks are often speculative, high-risk investments. The underlying holdings of the Funds may be leveraged, which will expose the holding to higher volatility and may accelerate the impact of any losses. These companies can be paying out more than they can support and may reduce their dividends or stop paying dividends at any time, which could have a material adverse effect on the stock price of these companies and the Fund’s performance. International investing may involve risk of capital loss from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Investments in smaller companies typically exhibit higher volatility. Narrowly focused funds typically exhibit higher volatility.
GAA, TRTY, GMOM: Investments in sovereign and quasi-sovereign debt obligations involve special risks not present in corporate debt obligations. The issuer of the sovereign debt or the authorities that control the repayment of the debt may be unable or unwilling to repay principal or interest when due, and the Fund may have limited recourse in the event of a default. Investments in commodities are subject to higher volatility than more traditional investments. The fund may invest in derivatives, which are often more volatile than other investments and may magnify the Fund’s gains or losses. The use of leverage by the fund managers may accelerate the velocity of potential losses. The Fund employs a ‘momentum’ style of investing that emphasizes investing in securities that have had higher recent price performance compared to other securities. This style of investing is subject to the risk that these securities may be more volatile than a broad cross section of securities or that the returns on securities that have previously exhibited price momentum are less than returns on other styles of investing or the overall stock market. Investments in smaller companies typically exhibit higher volatility. Diversification may not protect against market loss. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. The risk of investing in securities of ETFs, ETPs and investment companies typically reflect the risk of the types of instruments in which the underlying ETF, ETP or investment company invests. In addition, with such investments the Fund bears its proportionate share of fees and expenses of the underlying entity. As a result, the Fund’s operating expenses may be higher, and performance may be lower.
TAIL, FAIL: Derivatives are financial instruments that derive their performance from an underlying reference asset, such as an index. Derivatives, such as put options, can be volatile, and a small investment in a derivative can have a large impact on the performance of the Fund as derivatives can result in losses in excess of the amount invested. Options used by the Fund to offset its exposure to tail risk or reduce volatility may not perform as intended. There can be no assurance that the Fund’s put option strategy will be effective. The put option strategy may not fully protect the Fund against declines in the value of its portfolio securities.
FAIL: Prior to 3/15/21, FAIL operated as Cambria Sovereign Bond ETF (SOVB). On that date, the investment strategy and objective also changed. Any performance prior to 3/15/21 was achieved under the previous strategy.
VAMO: The fund may hedge up to 100% of the value of the fund’s long portfolio. The fund may use derivatives to attempt to effectuate such hedging during times when the advisor believes that the U.S. equity market is overvalued from a valuation standpoint, or model identifies unfavorable trends and momentum in the U.S. equity market. The primary risk of derivative instruments is changes in market value of securities held by the fund and of the derivative instruments relating to those securities may not be proportionate. Derivatives are often more volatile than other investments and may magnify the fund’s gains or losses.
BLDG: The fund’s investments are concentrated in real estate-related industries, and the fund may be susceptible to loss due to adverse occurrences affecting these industries including declines in the real estate market, decreases in property revenues, increases in interest rates, increases in property taxes and operating expenses, legal and regulatory changes, a lack of credit or capital, defaults by borrowers or tenants, environmental problems and natural disasters. The availability of mortgages and changes in interest rates may also affect real estate values.
TOKE: Cannabis companies are subject to various laws and regulations that may differ at the local and federal level. They are subject to the risks associated with agricultural, biotechnology and pharmaceutical industries. Since the use of marijuana is illegal under United States federal law, federally regulated banking institutions may be unwilling to make financial services available to growers and sellers of marijuana. The Fund’s investments are concentrated in the cannabis industry, and the Fund may be susceptible to loss due to adverse occurrences affecting the industry. The Fund is also expected to have significant exposure to health care, consumer discretionary and consumer staples sectors.
TYLD: There is no guarantee that the Fund will achieve its investment goal. Investing involves risk, including the possible loss of principal. Bonds and bond funds are subject to interest rate risk and will decline in value and rising interest rates. High yield bonds involve greater risk of default or downgrade and are more volatile than investment-grade securities, due to the speculative nature of their investments. International investing may involve risk of capital from unfavorable fluctuations in currency values, from differences in generally accepted accounting principles, or from economic or political instability in other nations. Emerging markets involve heightened risks related to the same factors as well as increased volatility and lower trading volume. Investment in smaller companies typically exhibit higher volatility. The Fund is not diversified. TYLD is new and has a limited operating history.
All Cambria ETFs are actively managed.
The S&P 500 Index is an index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.
The S&P SmallCap 600 Index (S&P 600) is an index covering the small-cap range of American stocks, using a capitalization-weighted index.
The MSCI EAFE Index is a free-float weighted equity index. The index was developed with a base value of 100 as of December 31, 1969. The MSCI EAFE region covers DM countries in Europe, Australasia, Israel, and the Far East.
The MSCI EM TR (Emerging Markets Total Return) Index is a free-float weighted equity index that captures large and mid-cap representation across Emerging Markets (EM) countries. The index covers approximately 85% of the free float-adjusted market capitalization in each country.
The MSCI ACWI Index is a market capitalization weighted index designed to provide a broad measure of equity-market performance throughout the world and is maintained by Morgan Stanley Capital International. It is comprised of stocks from both developed and emerging markets.
S&P’s Balanced Equity and Bond Index Series is comprised of three multi-asset class indices, each with a particular risk level. The indices consist of U.S. Treasury Bonds and Equities with the following asset mix proportions: Conservative: 75% Treasuries / 25% Equities, Moderate: 50% Treasuries / 50% Equities, Growth: 25% Treasuries / 75% Equities.
The World Government Bond Index (WGBI) measures the performance of fixed-rate, local currency, investment grade sovereign bonds. The WGBI is a widely used benchmark that currently comprises sovereign debt from over 20 countries, denominated in a variety of currencies, and has more than 25 years of history available. The WGBI provides a broad benchmark for the global sovereign fixed income market. Sub-indices are available in any combination of currency, maturity, or rating.
The FTSE EPRA Nareit Global Index is designed to track the performance of listed real estate companies and REITS in both developed and emerging markets.
30-Day SEC Yield: A calculation based on a 30-day period ending on the last day of the previous month. It is computed by dividing the net investment income per share earned during the period by the maximum offering price per share on the day of the period.
12-Month Yield: An expression of the amount paid out in distributions in the form of dividends and interest payments (pre-tax) by the investment in the last 12 months expressed as a percentage of the previous month-end price plus any capital gains. Distributions does not include any return of capital payments.
As of 9/30/24 SYLD received a 5-star overall rating, 3 years a 3-star rating, 5 years a 5-star rating, and 10 years a 5-star rating based on risk adjusted returns out of 375, 375, 362, 282 funds respectively in the Mid-Cap Value category.
As of 9/30/24 EYLD received a 4-star overall rating, 3 years a 5-star rating, and 5 years a 4-star rating based on risk adjusted returns out of 711, 711, 639 funds respectively in the Diversified Emerging Markets category.
As of 9/30/24 FYLD received a 4-star overall rating, 3 years a 4-star rating, 5 years a 4-star rating, and 10 years a 3-star rating based on risk adjusted returns out of 47, 47, 42, 24 funds respectively in the Foreign Small/Mid Value category.
As of 9/30/24 GAA received a 4-star overall rating, 3 years a 3-star rating, and 5 years a 4-star rating based on risk adjusted returns out of 340, 340, 327 funds respectively in the Global Allocation category.
As of 9/30/24 VAMO received a 3-star overall rating, 3 years a 3-star rating, and 5 years a 3-star rating based on risk adjusted returns out of 131, 131, 119 funds respectively in the Long-Short Equity category.
As of 9/30/24 TRTY received a 3-star overall rating, 3 years a 3-star rating, and 5 years a 3-star rating based on risk adjusted returns out of 222, 222, 206 funds respectively in the Tactical Allocation category.
As of 9/30/24 GMOM received a 3-star overall rating, 3 years a 3-star rating, and 5 years a 3-star rating based on risk adjusted returns out of 229, 229, 210 funds respectively in the Tactical Allocation category.
As of 9/30/24 BLDG received a 5-star overall rating and 3 years a 5-star rating based on risk-adjusted returns out of 179, 179 funds in the Global Real Estate category.
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The Morningstar RatingTM for funds, or “star rating”, is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange traded-funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The Morningstar Rating does not include any adjustment for sales loads. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating / 40% three-year rating for 60-119 months of total returns, and 50% 10-year rating / 30% five-year rating / 20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Past performance is no guarantee of future results.