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Horizons ETFs launches Horizons Cdn Insider Index ETF


Horizons ETFs Management (Canada) Inc has launched the Horizons Cdn Insider Index ETF (HII), an ETF that uses insider commitment to select and confirm the performance potential of its stock holdings.

Units of HII have begun trading tomorrow on the Toronto Stock Exchange (TSX). HII seeks to replicate, to the extent possible, the performance of the INK Canadian Insider Index, net of expenses. The Index is designed to provide exposure to the performance of 50 TSX-listed stocks which, amongst other things, demonstrate significant amounts of insider buying and ownership.

The Index was developed by INK Research Corp, a Canadian-based research firm that tracks insider buying statistics of North American-listed companies. The stocks within the Index, in aggregate, provide diversified Canadian market exposure and hold positive metrics of a combination of fundamental valuation, insider commitment and price momentum metrics.

Not to be confused with the practice of 'insider trading,' insider commitment refers to the purchase and ownership of shares in a corporation by an officer or director of the company. Officers and directors who hold equity have a financial interest in the success of their firm. This can make insider commitment data a powerful confirmation signal of an investment when combined with traditional valuation and price momentum indicators.

"Finding true value and momentum stocks can be difficult due to pitfalls in the ratios themselves, such as a value stock continuing to decline in price or price momentum indicators being the result of a stock that is overbought," says Howard Atkinson, President of Horizons ETFs. "The team at INK Research believes insider commitment can be a powerful way to confirm the future growth potential of a stock, since a high level of insider commitment at a company means that those with the most profound understanding of a company – its officers and directors  – remain committed to the future prospects of their firm."

The issuers included in the Index are selected based on INK Research's proprietary INK Edge VIP (Value, Insider, Price) screening criteria — a three category, equal-weight methodology of valuations, insider commitment and price momentum.

"At Horizons ETFs, we believe that outperforming a broad market-cap index like the S&P/TSX Composite Index can be a difficult feat," says Atkinson, "However, HII's strategy, which puts an equal weighting on valuations, insider commitment and price momentum, provides the potential for outperforming the broader Canadian stock market, as it selects issuers that tend not to be as widely held by larger-cap indices."

This is the first index designed by INK Research and encapsulates the best practices of using insider commitment as one of the tools to select stocks, stated Ted Dixon, CEO of INK Research:

"We're proud to be partnering with Horizons ETFs in launching the first ETF in Canada that explicitly uses insider commitment as one of the core metrics in its investment strategy," says Dixon. "On its own, insider commitment may not be able to highlight stocks with future growth potential, but when you combine this analysis with value and price momentum indicators, there can be an opportunity to outperform the broader markets."

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