SimonSkafar
NUGO strategy
Nuveen Growth Opportunities ETF (NYSEARCA:NUGO) is an actively managed fund listed on 9/27/2021. It has a portfolio of 45 stocks, a trailing 12-month yield of 0.13% and a total expense ratio of 0.55%.
As described by Nuveen,
The Fund seeks long-term capital appreciation through a concentrated growth portfolio that primarily invests in U.S. companies with market capitalizations of at least $1 billion. The investment team looks for high-quality companies that exhibit potential for attractive earnings growth, strong relative valuation, attractive cash flows, and significant long-term returns.
The fund may also invest up to 20% of assets in non-U.S. issuers through American Depositary Receipts (“ADRs”) and stocks listed on foreign markets. The fund’s turnover rate in the most recent fiscal year was 34%, which is quite low for an actively managed fund.
NUGO portfolio
As of writing, the portfolio is almost exclusively invested in U.S. companies (about 98% of asset value), mostly in large and mega caps (about 94% of assets). This article will use as a benchmark the S&P 500 Growth Index, represented by iShares S&P 500 Growth ETF (IVW).
The heaviest sector is technology (46.7%), followed by consumer discretionary (14.9%), healthcare (11.3%) and communication (11.1%). Other sectors are below 7%. The sector breakdown is very similar to the S&P 500 Growth Index. Compared to the benchmark, NUGO overweights healthcare and underweights industrials. It ignores real estate, and utilities as well.
NUGO sector breakdown (Chart: author; data: Nuveen, iShares)
The portfolio is very concentrated: the top 10 companies, listed in the next table with growth metrics, represent 66.4% of asset value (vs 57.6% in IVW). Microsoft has almost the same weight as in the benchmark (13.68% vs 13.45%), but Apple is significantly lighter (7.94% vs 12.69%).
|
Ticker |
Name |
Weight% |
EPS growth %TTM |
EPS growth %5Y |
Sales Growth %TTM |
Sales Growth %5Y |
|
Microsoft Corp. |
13.68 |
11.28 |
35.37 |
7.50 |
13.98 |
|
|
NVIDIA Corp. |
9.25 |
222.20 |
7.65 |
57.07 |
22.66 |
|
|
Amazon.com, Inc. |
8.96 |
75.88 |
N/A |
10.32 |
23.64 |
|
|
Apple, Inc. |
7.94 |
0.45 |
15.55 |
-2.80 |
7.59 |
|
|
Alphabet, Inc. |
6.38 |
3.56 |
38.33 |
5.62 |
20.40 |
|
|
Meta Platforms, Inc. |
5.48 |
7.92 |
9.76 |
7.48 |
23.46 |
|
|
Mastercard, Inc. |
4.66 |
14.67 |
22.87 |
12.81 |
12.20 |
|
|
Eli Lilly and Co. |
3.87 |
-18.63 |
107.35 |
9.69 |
4.53 |
|
|
Broadcom Inc. |
3.68 |
25.65 |
2.37 |
7.88 |
11.43 |
|
|
Palo Alto Networks Inc. |
2.47 |
456.24 |
37.37 |
23.89 |
24.83 |
Fundamentals
NUGO is a bit more expensive than IVW regarding the price/earnings ratio, as reported in the next table. It is also significantly inferior to the benchmark in cash flow growth. Other valuation and growth metrics are similar.
|
NUGO |
IVW |
|
|
P/E TTM |
34.29 |
31.52 |
|
Price/Book |
8.28 |
8.99 |
|
Price/Sales |
4.89 |
5.13 |
|
Price/Cash Flow |
21.41 |
21.13 |
|
Earnings growth |
21.09% |
21.20% |
|
Sales growth % |
15.67% |
17.28% |
|
Cash flow growth % |
10.62% |
14.96% |
|
Book-value growth % |
10.76% |
11.96% |
In my ETF reviews, risky stocks are companies with at least 2 red flags among: bad Piotroski score, negative ROA, unsustainable payout ratio, bad or dubious Altman Z-score, excluding financials and real estate where these metrics are unreliable. With this assumption, 3 stocks out of 45 are risky in the portfolio: Boeing (BA), Intel (INTC) and DraftKings (DKNG). They weight only 2.7% asset value, which is an excellent point.
According to the calculation of my preferred quality metrics (reported in the next table), portfolio quality is significantly superior to the S&P 500 Index (SPY). The aggregate return on assets is especially impressive.
|
NUGO |
SPY |
|
|
Atman Z-score |
12.56 |
3.66 |
|
Piotroski F-score |
6.4 |
5.7 |
|
ROA % TTM |
16.8 |
7.01 |
Performance
Since inception, NUGO has outperformed the growth benchmark IVW, but lagged the broad index S&P 500, as plotted on the next chart.
NUGO vs IVW, SPY, since inception (Seeking Alpha)
Nevertheless, it has been the best performer by far over the last 12 months:
NUGO vs IVW, SPY, last 12 months (Seeking Alpha)
NUGO vs competitors
The next table compares characteristics of NUGO, IVW and the three largest U.S. equity growth ETFs:
|
NUGO |
IVW |
QQQ |
VUG |
IWF |
|
|
Inception |
9/27/2021 |
5/22/2000 |
3/10/1999 |
1/26/2004 |
5/22/2000 |
|
Expense Ratio |
0.55% |
0.18% |
0.20% |
0.04% |
0.19% |
|
AUM |
$2.89B |
$37.03B |
$244.82B |
$200.55B |
$83.52B |
|
Avg Daily Volume |
$2.26M |
$175.30M |
$19.41B |
$306.92M |
$491.47M |
|
Holdings |
45 |
229 |
102 |
211 |
447 |
|
Top 10 |
62.62% |
57.59% |
45.78% |
55.21% |
52.09% |
|
Turnover |
31.00% |
34.00% |
22.08% |
5.00% |
14.00% |
NUGO is the newest, smallest (in assets) and less liquid (in dollar volume) of this group. It also has the highest fee and the most concentrated portfolio.
The next chart compares total returns since NUGO inception. The best performer is the Nasdaq 100 ETF QQQ, and NUGO is second to last.
NUGO vs competitors since 10/4/2021 (Seeking Alpha)
Over the last 12 months, QQQ still is the winner and NUGO comes second shortly behind it.
NUGO vs competitors, last 12 months (Seeking Alpha)
Takeaway
Nuveen Growth Opportunities ETF is an actively managed growth fund with a focus on quality. Like all growth funds, it is greatly overweight in technology. It is slightly inferior to the S&P 500 Growth Index regarding valuation and cash flow growth, but quality metrics are excellent. It is less diversified across holdings than the most popular growth ETFs. Its performance since inception is average relative to peers and turnover is quite low for an actively managed fund, which doesn’t justify the significantly higher fee. However, price history is short and may not represent the fund’s long term potential. Anyway, until NUGO proves itself, investors looking for exposure to the growth investing style will likely prefer the largest and most liquid ETF in this category: QQQ.
