On June 30, Defiance debuted the new Defiance KSM TipRanks Analyst ETF (RANK). With an expense ratio of 60 basis points, this fund aims to leverage Wall Street’s highest-rated analyst consensus data to capitalize on U.S. market momentum.
Key Takeaways
- The Defiance KSM TipRanks Analyst ETF (RANK) tracks the market’s analyst consensus data to systematically capitalize on U.S. market momentum.
- The fund selects securities by ranking large-cap U.S. companies based on a combined analyst recommendations score and stock momentum ranking.
- Analyst ratings can serve as market catalysts, as widespread sentiment shifts can trigger measurable movements in stock prices.
Scoring Analyst Consensus
The fund tracks the TipRanks US Momentum Analysts iNDEX (USANLTIP). The index draws its holdings from the 500 largest U.S. companies based on market capitalization. Those companies are ranked by their current number of analyst buy recommendations. The methodology then selects the 100 companies with the highest analyst recommendations score to move through the ranking process.
Each of the 100 companies receives a stock momentum ranking. That ranking is based on their current share price relative to the prior eight-month average share price, and on the 50-day average share price relative to the 200-day average share price. From there, the methodology selects the top 50 companies with the highest momentum rankings for inclusion in the index.
Capping Concentration Risk
To protect against concentration risk, the index caps any single sector to 20 companies and a maximum portfolio weight of 40%. To ensure broader exposure, each individual holding has a maximum allocation of 6%, with the index rebalanced on a quarterly basis. From there, the methodology further adjusts company weights by their analyst recommendation scores and their stock momentum rankings.
