New ETF - Hamilton Captial Canadian Bank Dynamic Weight HCB - for Canadian Bank investors
Here's some highlights from a Globe and Mail article today on the ETF - New ETF offers unique investing approach to the Big Six banks -
In the cozy world of the Big Six, which control the vast majority of lending activity in Canada, today’s lagging bank stock tends to rebound relatively quickly – rewarding nimble investors who are willing to ditch their winners.
A new exchange-traded fund will now do the heavy lifting for you.
The Hamilton Capital Canadian Bank Dynamic-Weight ETF will begin trading Tuesday on the Toronto Stock Exchange under the ticker symbol HCB. It will invest in all Big Six banks, but weight the stocks based on their recent performances rather than market capitalization. It will rebalance its holdings each month.
Three bank stocks will have an 80-per-cent weighting in the fund, or about 26.5 per cent each. These are the laggards, or oversold stocks whose current prices trail their 50-day averages.
The other three bank stocks will have a total weighting of just 20 per cent, or about 6.5 per cent each. These names are the leaders, or overbought stocks trading above their 50-day averages.
In other words, this ETF is one of the newer 'smart' ETFs and the smart part comes from following an investment theme that has worked time and time again - the worse performing bank from last year will be one of the best performing banks in the next few.A study from BMO Nesbitt Burns in 2015, using a decade’s worth of data, found a similar trend: Overweighting the prior year’s three worst-performing banks stocks and underweighting the best is a market-beating approach.
According to Hamilton's website (http://www.hamilton-capital.com/etf/hcb/), the MER on this ETF is 0.55% which is also expected to change as the actual trading cost haven't been factored in.
This ETF might be the 'cleanest' way to implement betting on the banks' long term behaviours of last year's looser being this year's winner.