AdvisorShares announced that the AdvisorShares TrimTabs Float Shrink ETF (NYSE Arca: TTFS) has received a Five-Star Morningstar Rating for both its three-year and overall risk adjusted performances from inception through October 31, 2014 out of 347 funds in Morningstar’s Mid-Cap Blend category.
TTFS is managed by TrimTabs Asset Management (TrimTabs), a Sausalito, Calif.-based SEC registered investment advisor affiliated with TrimTabs Investment Research, the renowned independent institutional research firm founded by Charles Biderman that focuses on equity market liquidity.
In pursuing its investment strategy, TTFS invests in companies that shrink their equity float—the total number of shares publicly available for trading—while growing free cash flow and reducing leverage on their balance sheets. These are important attributes that differentiate TTFS from a passive approach to buyback investing. Utilizing a quantitative algorithm, the manager screens approximately 3,000 U.S. companies on a daily basis and then invests in their highest ranked 100 stocks for TTFS’ equal-weighted portfolio. TrimTabs’ liquidity research shows that companies using free cash flow to shrink the trading float of shares create a potentially profitable supply and demand imbalance as more money chases fewer shares, and TTFS’ performance reinforces that notion. Since its inception on October 4, 2011, and through October 31, 2014, TTFS has outperformed the Russell 3000 Index.
Morningstar compares each ETF’s risk-adjusted return, with at least a three-year history, to the open-end mutual fund rating breakpoints for each of its respective categories. Consistent with the open-end mutual fund ratings, TTFS earned its five-star ranking as being in the top 10% of funds – that includes both ETFs and mutual funds – in the Mid-Cap Blend category.
“We are pleased that TTFS becomes yet another domestic equity strategy from AdvisorShares transparent actively managed ETF suite to earn a Five-Star Morningstar Rating™,” said Noah Hamman, chief executive officer of AdvisorShares. “Although statistically speaking it’s difficult for active equity managers to outperform their benchmark indexes, it’s not hard to find those managers who produce alpha especially when they’re fully transparent. This ranking is further testament to TrimTabs industry-leading portfolio management delivered with the sought-after benefits of a transparent active ETF structure.”
“For decades, our industry-leading liquidity research has shown that companies with positive free cash flow that engage in float shrink can create a profitable supply and demand imbalance as more money chases fewer shares,” said Mr. Biderman, chief executive officer of TrimTabs and co-portfolio manager of TTFS. “Our key assumption is that the enterprise value should not drop at companies that use a portion of their free cash flow to reduce the number of shares outstanding. Indeed over the past three years we have discovered that price of the remaining shares have gone up by more than the percentage of share count reduction.”
AdvisorShares is a provider of actively managed ETFs. As of October 31, 2014, AdvisorShares offers 26 actively managed ETFs with over $1.5 billion of assets under management. AdvisorShares provides educational support to help financial advisors and investors understand the benefits of actively managed ETFs and their underlying investment strategies.