Princeton-based Javelin Investment Management has launched the JETS Contrarian Opportunities Index Fund.
The fund is designed to track the Dow Jones US Contrarian Opportunities Index, whose universe consists of stocks that have underperformed in recent years, but which also applies qualitative screens in the hope of identifying stocks with strong fundamentals.
"This fund advances the concept of index-based investing," says Javelin president and founder Brint Frith. "Index funds often apply only quantitative criteria, such as market capitalisation. The result can be a crudely-defined portfolio that makes no attempt at selectivity. We are impressed that Dow Jones has devised a benchmark that preserves the transparency and discipline of an index, but also encapsulates a well-researched investment strategy."
It is the first ETF based on a contrarian strategy, which focuses on stocks that have recently underperformed the market. Javelin’s SEC filing anticipates an expense ratio of 0.58 per cent for the new fund.
The Dow Jones US Contrarian Opportunities Index is composed of 125 equal-weighted US equities. Eligibility is based on a semi-annual screening that identifies stocks with the lowest three-year trailing total returns. From this pool, constituents are selected according to rankings by ten qualitative factors, including sales growth, price to cash flow ratio, and recent earnings revisions.