Business Columnist Bill Deener has followed John Del Vecchio actively managed FLAG ETF for a year and discusses its impressive returns in the Dallas Morning News.
Dallas-based ETF tries to separate fact from fiction
"About a year ago I wrote a column about a newly launched exchange-traded fund called Forensic Accounting ETF (ticker: FLAG) that does all the work for small investors. It was started by John Del Vecchio, 38, a Dallas expert on financial statement analysis and author of the book What’s Behind the Numbers?
How it works
When I discovered his fund, it had only $2.5 million in assets and was barely a blip on the Dallas investing scene. But since then, the fund has started to gain traction, mainly because it has outperformed the Standard & Poor’s 500 Index as Del Vecchio predicted it would. It now has about $10 million in assets.
“We had a very good first year, so that kind of validated the concept,” Del Vecchio said. “Investment advisers and brokers are starting to buy the fund.”
Del Vecchio developed an index called the Del Vecchio Quality Index and then set up the Forensic Accounting ETF to track that index. Here’s the key thing: The index assigns a grade of A to F to 500 large U.S. stocks, and the grade for each company is based on the quality of its earnings.
He and his team scour financial statements looking for companies with aggressive revenue recognition policies, weak cash flows and inventory problems. Companies with the highest quality of earnings receive an A and make up 40 percent of the index. Those with B, C and D each make up 20 percent of the index, while those with F grades are excluded.
The index tracks 400 companies, and it is recalculated every month.
Full story: http://www.dallasnews.com/business/columnists/will-deener/20140420-dallas-based-etf-tries-to-separate-fact-from-fiction.ece