Want to invest exclusively in founder-led companies? There’s an ETF for that
Founder-led companies are receiving particular attention on Wall Street and in academia. For example, according to research by Bath & Co. Posted in Harvard business review:
“An index of S&P 500 companies in which the founder is still deeply involved has performed 3.1 times better than others over the past 15 years.”
Likewise, Loyalty investments also suggests that founder-led companies can benefit from a “competitive advantage”. For example, these companies are less likely to suffer from managerial myopia, such as cutting back on investments to meet short-term reporting goals.
Examples of Founder-Led Actions
According to Resources from Investing Pro, interested readers can rank founder-led companies based on several criteria. In the first case, if we look at the market capitalization (cap), we find Amazon (NASDAQ:) at the top of the list. Come next You’re here (NASDAQ:), Berkshire Hathaway(NYSE:), Nvidia (NASDAQ:), Metaplatforms (NASDAQ:)and many more.
In terms of the most undervalued stocks whose companies are still run by their founders, we see the real estate data group CoStar (NASDAQ:); Metaplatforms; online fashion retailer Boohoo.com (OTC:); and Dell Technologies (NYSE:).
Investors who pay attention to analysts’ price targets would be interested to know that several stocks could potentially see a significant upside from their current price levels. These founder-led actions include clinical-stage immuno-oncology company Allogeneic therapy (NASDAQ:); biopharmaceutical name Pharmaceutical Ultragenyx (NASDAQ:); cloud communication platform Twilio (NYSE:); and price comparison platform Lendingtree (NASDAQ:)specializing in consumer credit.
Among founder-led companies, stocks of the fastest growing stocks generally command a premium. According to Investing Proseveral high growth names to focus on would be real estate investment trust (REIT) Investment and management of apartments (NYSE:); asset manager black stone (NYSE:); private equity group KKR (NYSE:); and car buying platform carvana (NYSE:).
Readers can also drill deeper into the website to find stocks that have experienced price declines, those trading at relatively cheap valuation levels, or stocks with low beta values.
The universe of founder-led companies is vast, and choosing stocks that fit individual portfolio goals requires considerable due diligence. An alternative for many retail investors might be to purchase an exchange-traded fund (ETF) instead. Today’s article presents such a fund.
ETF Global X Founder-Run Companies
- Current price: $30.81
- 52 week range: $26.50-$38.00
- Dividend yield: 0.20%
- Spending rate: 0.45 per year
the ETF Global X Founder-Run Companies (NYSE:) invests primarily in mid- to large-cap companies in the United States led by founding CEOs. Fund managers emphasize the importance of innovation and the entrepreneurial spirit that these leaders can inspire in their businesses. The fund started trading in February 2017.
BOSS, which tracks the Solactive US Founder-Run Companies Index, currently has 98 holdings. The portfolio’s top 10 stocks represent almost 17% of the net assets of $13.1 million. In other words, BOSS is a small fund.
Looking at sectors, we see information technology (26.0), finance (19.1%), healthcare (17.4%), real estate (11.9%), consumer discretionary (7.9%) and communication services (7.3%), among others.
Energy groups Pioneer of natural resources (NYSE:) and New Fortress Energy (NASDAQ:); basic materials company West Lake (NYSE:); steel producer and metal recycler steel dynamics (NASDAQ:); health care provider LHC Group (NASDAQ:); and local television and media company Nexstar Broadcasting (NASDAQ:) are among the big names on the list.
The ETF is down 9.3% year-to-date and 5.1% over the past 12 months. Still, BOSS saw a record price level in November 2021, after which many stocks in the fund came under pressure.
In fact, on February 24, the ETF hit a 52-week low. But since then, BOSS has returned more than 12%. Meanwhile, the P/E and P/B ratios currently stand at 30.94x and 3.76x respectively.
We love the diversity of BOSS. Readers who believe the founding managers could help create long-term shareholder value should research the fund further.