DYNF - Is OMFL's Approach Really A Game Changer? Conviction Without Certainty
2024-04-20 08:07:42 ET
Summary
- OMFL implements one of four portfolio regimes based on a model's assessment of the business cycle. Factors emphasized may include size, value, momentum, volatility, and quality.
- OMFL was the top-performing all/large-cap blend ETF for the five years ending December 2022. However, its ranking since is only #67/117, providing more evidence that past performance is unreliable.
- However, it's also unfair to use past performance to justify selling. A more reasonable approach is to assess OMFL's fundamentals and decide if you believe the risk exceeds the reward.
- My fundamental analysis reveals OMFL has implemented a "recovery phase" portfolio, which involves holding highly-volatile small- and large-cap stocks with little momentum.
- The current portfolio is risky, and OMFL might be better suited for traders looking to capitalize on short-term opportunities rather than for long-term buy and hold investors.
Investment Thesis
It's been one year since I initiated coverage on the Invesco Russell 1000 Multifactor ETF ( OMFL ). In that article, I expressed my skepticism over the sensitivity of its proprietary model and reminded readers not to rely on past performance when deciding which ETF to buy. Indeed, OMFL has lagged behind benchmarks like the iShares Russell 1000 ETF ( IWB ), the Vanguard Dividend Appreciation ETF ( VIG ), and the Invesco S&P MidCap 400 Pure Value ETF ( RFV ) over the last year....
Is OMFL's Approach Really A Game Changer? Conviction Without Certainty