Anybody in the market for a few cable networks? Comcast announced today that it is moving forward with a spin-off of multiple cable networks, such as CNBC, MSNBC, Golf Channel, Oxygen, and more. As consumers continue to leave traditional TV, management believes the spun-off company will be “better positioned to serve our audiences and drive shareholder returns…” Time will tell.

The important part of any spin off, but especially one with multiple unique assets, is understanding how each individual asset contributes to the overall company. For instance, one network may be a screaming value based on its performance, while another may be lagging with viewership and costing the company more than it’s worth. Understanding each part’s value is key to valuing the overall entity.

The same is true when it comes to ETF and mutual fund investing. To truly know if you’re paying a good price for a mutual fund, one must understand each individual holding and how it contributes to the entire portfolio.

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Our ETF and mutual fund analysis does just that. We leverage our proven-superior fundamental research on the individual holdings of a fund to assess the profitability and valuation of the overall portfolio. This process enables us to create forward looking Risk/Reward ratings for and mutual funds.

After scouring our database of ~7,300+ ETFs and mutual funds, we found a fund that successfully picks good companies at good prices while charging below average fees.

The information below comes from the recent Long Idea report on this mutual fund, available to Pro and Institutional members. And, you can buy the full report a la carte here.

Forward-Looking Research Reveals a Very Attractive Fund

This mutual fund earns our Very Attractive Predictive Fund Rating, while Morningstar gives it a 2-Star (backward-looking) rating. Our analysis of holdings reveals the fund has a higher allocation to good stocks, i.e. profitable companies with cheap stock prices, than its benchmark.

We leverage our Robo-Analyst technology to assess a mutual fund’s portfolio quality by analyzing the fund’s individual stock holdings. This uniquely rigorous approach enables us to create forward-looking mutual fund ratings based on our ratings for the stocks held in a fund. 

Per Figure 1 in the full report, the fund allocates 32% of its assets to Attractive-or-better rated stocks compared to just 14% for the benchmark. On the flip side, this fund allocates just 15% of its assets to Unattractive-or-worse rated stocks compared to 39% for the benchmark.

Per Figure 2 in the full report, our holdings analysis also reveals the fund’s portfolio is of much higher quality than the S&P 500 as represented by State Street SPDR S&P 500 ETF Trust (SPY). SPY earns our Attractive rating, but only 7% of SPY’s portfolio is allocated to stocks rated Attractive-or-better and 39% is allocated to stocks rated Unattractive-or-worse.

Quality Stocks Drive Very Attractive Risk/Reward Rating

Figure 3 in the full report contains our detailed rating for the mutual fund, which includes each of the criteria we use to rate all mutual funds under coverage. These criteria are the same for our Stock Rating Methodology, because the performance of a mutual fund’s holdings is responsible for the performance of the mutual fund after fees. Figure 3 in the full report also compares the mutual funds rating with those of its benchmark and SPY.

The mutual fund’s holdings are superior or equal to the benchmark in all five of the criteria that make up our Portfolio Management rating. Specifically:

  • The fund’s ROIC is 11% and higher than the 10% earned by the benchmark’s holdings.
  • The fund’s free cash flow (FCF) yield of 5% is higher than the benchmark and SPY’s at 2%.
  • The price-to-economic book value (PEBV) ratio for the fund is 1.8, which is much lower than the benchmark’s at 3.2 and SPY’s at 4.3.
  • Our discounted cash flow analysis reveals an average market implied growth appreciation period (GAP) of just 21 years for the fund’s holdings compared to 47 years for the benchmark and 72 years for SPY.

….there’s much more in the full report. You can buy the report a la carte here.

Or, become a Professional or Institutional member – they get all Long Idea reports.