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Best And Worst Q4’15: Small Cap Growth ETFs, Mutual Funds And Key Holdings

Summary The Small Cap Growth style ranks eleventh in Q4’15. Based on an aggregation of ratings of 11 ETFs and 427 mutual funds. SLYG is our top-rated Small Cap Growth style ETF and VSCRX is our top-rated Small Cap Growth style mutual fund. The Small Cap Growth style ranks eleventh out of the twelve fund styles as detailed in our Q4’15 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Small Cap Growth style ranked eleventh as well. It gets our Dangerous rating, which is based on an aggregation of ratings of 11 ETFs and 427 mutual funds in the Small Cap Growth style. See a recap of our Q3’15 Style Ratings here. Figure 1 ranks from best to worst the nine small-cap growth ETFs that meet our liquidity standards and Figure 2 shows the five best and worst-rated small-cap growth mutual funds. Not all Small Cap Growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 29 to 1186). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Small Cap Growth style should buy one of the Attractive-or-better rated mutual funds from Figure 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 (click to enlarge) * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The Vanguard S&P Small-Cap 600 Growth ETF (NYSEARCA: VIOG ) and the PowerShares Russell 2000 PureGrowth Portfolio ETF (NYSEARCA: PXSG ) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 (click to enlarge) * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The Managed Porftolio Smith Group Small Cap Focused Growth (SGSNX, SGSVX) and the American Beacon Bahl & Gaynor Small Cap Growth (GBSIX, GBSYX) are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums. The State Street SPDR S&P 600 Small Cap Growth ETF (NYSEARCA: SLYG ) is the top-rated Small Cap Growth ETF and the Virtus Small-Cap Core Fund (MUTF: VSCRX ) is the top-rated Small Cap Growth mutual fund. SLYG earns our Neutral rating and VSCRX earns our Very Attractive rating. The First Trust Small Cap Growth AlphaDEX ETF (NYSEARCA: FYC ) is the worst-rated Small Cap Growth ETF and the Dreyfus Managers Small Cap Growth Fund (MUTF: DSGAX ) is the worst-rated Small Cap Growth mutual fund. FYC earns a Dangerous rating while DSGAX earns a Very Dangerous rating. Hawaiian Holdings (NASDAQ: HA ) is one of our favorite stocks held by Small Cap Growth ETFs and mutual funds and earns our Attractive rating. Since 2010, Hawaiian Holdings has grown after-tax profits ( NOPAT ) by 11% compounded annually. The company’s current 12% return on invested capital ( ROIC ) is a great improvement over the 7% earned in 2013 and points to the business becoming more profitable. Despite the improving fundamentals, HA remains undervalued. At its current price of $36/share, Hawaiian Holdings has a price to economic book value ( PEBV ) ratio of 1.0. This ratio means that the market expects Hawaiian’s NOPAT to never meaningfully grow from current levels. If Hawaiian Holdings can grow NOPAT by just 9% compounded annually over the next decade , the stock is worth $46/share today – a 27% upside. Scholastic Corporation (NASDAQ: SCHL ) is one of our least favorite stocks held by Small Cap Growth funds and earns our Very Dangerous rating. Since 2011, Scholastic’s NOPAT has declined by 8% compounded annually. The company’s ROIC has followed suit from 5% in 2011 to its current bottom quintile 1% in 2015. Despite the deteriorating operations of the business, shares are still priced for significant growth. To justify its current price of $42/share, Scholastic must grow NOPAT by 6% compounded annually for the next 15 years . This expectation seems unlikely to be met considering Scholastic’s inability to grow NOPAT over the past five years. Figures 3 and 4 show the rating landscape of all Small Cap Growth ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs (click to enlarge) Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Funds (click to enlarge) Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Thaxston McKee receive no compensation to write about any specific stock, style, or theme.

Best And Worst Q4’15: Mid Cap Value ETFs, Mutual Funds And Key Holdings

Summary The Mid Cap Value style ranks seventh in Q4’15. Based on an aggregation of ratings of 14 ETFs and 120 mutual funds. SYLD is our top-rated Mid Cap Value style ETF and VEVRX is our top-rated Mid Cap Value style mutual fund. The Mid Cap Value style ranks seventh out of the twelve fund styles as detailed in our Q4’15 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Mid Cap Value style ranked fifth. It gets our Dangerous rating, which is based on an aggregation of ratings of 14 ETFs and 120 mutual funds in the Mid Cap Value style. See a recap of our Q3’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Mid Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 22 to 553). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Mid Cap Value style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 (click to enlarge) * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The First Trust RBA Quality Income ETF (NASDAQ: QINC ) and the Direxion Value Line Mid- and Large-Cap High Dividend ETF (NYSEARCA: VLML ) are excluded from Figure 1 because their total net assets are below $100 million and do not meet our liquidity minimums. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 (click to enlarge) * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The Cambria Shareholder Yield ETF (NYSEARCA: SYLD ) is the top-rated Mid Cap Value ETF and the Victory Sycamore Established Value Fund (MUTF: VEVRX ) is the top-rated Mid Cap Value mutual fund. SYLD earns a Very Attractive rating and VEVRX earns an Attractive rating. The PowerShares Dividend Achievers ETF (NYSEARCA: PEY ) is the worst-rated Mid Cap Value ETF and the Touchstone Mid Cap Value Fund (MUTF: TCVAX ) is the worst-rated Mid Cap Value mutual fund. PEY earns a Dangerous rating and TCVAX earns a Very Dangerous rating. Ingram Micro Inc. (NYSE: IM ) is one of our favorite stocks held by Mid Cap Value ETFs and Mutual funds and earns our Very Attractive rating. Since 2011, Ingram Micro has grown after-tax profits ( NOPAT ) by 11% compounded annually. The company has improved its return on invested capital ( ROIC ) to 8% from 6% over this same timeframe. Ingram Micro is currently undervalued given the strength of its business. At its current price of $31/share, Ingram Micro has a price to economic book value ( PEBV ) ratio of 0.9. This ratio means the market expects Ingram Micro’s profits to permanently decline by 10%. If Ingram Micro can grow NOPAT by 6% compounded annually for the next five years , the stock is worth $36/share today – a 16% upside. LendingClub Corporation (NYSE: LC ) is one of our least favorite stocks held by Mid Cap Value ETFs and mutual funds and earns our Dangerous rating. Since 2009, LendingClub’s NOPAT has fallen from -$11 million to -$22 million on a trailing twelve-month basis. The company currently earns a bottom quintile ROIC of -4% and has a -15% free cash flow yield. After falling over 40% this year, investors may think that LC presents a great value, but we think differently. The expectations baked into the stock price still imply rather extraordinary growth. To justify its current price of $12/share, LendingClub must immediately achieve pre-tax margins of 8% (-14% in 2014) and grow revenues by 29% compounded annually for the next 12 years . Figures 3 and 4 show the rating landscape of all Mid Cap Value ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs (click to enlarge) Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Funds (click to enlarge) Sources: New Constructs, LLC and company filings Disclosure: David Trainer and Blaine Skaggs receive no compensation to write about any specific stock, style or theme.

Best And Worst Q4’15: Large Cap Value ETFs, Mutual Funds And Key Holdings

Summary The Large Cap Value style ranks first in Q4’15. Based on an aggregation of ratings of 44 ETFs and 855 mutual funds. DIA is our top-rated Large Cap Value style ETF and FVSAX is our top-rated Large Cap Value style mutual fund. The Large Cap Value style ranks first out of the twelve fund styles as detailed in our Q4’15 Style Ratings for ETFs and Mutual Funds report. Last quarter , the Large Cap Value style ranked first as well. It gets our Attractive rating, which is based on an aggregation of ratings of 44 ETFs and 855 mutual funds in the Large Cap Value style. See a recap of our Q3’15 Style Ratings here. Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all Large Cap Value style ETFs and mutual funds are created the same. The number of holdings varies widely (from 17 to 1000). This variation creates drastically different investment implications and, therefore, ratings. Investors seeking exposure to the Large Cap Value style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2. Figure 1: ETFs with the Best & Worst Ratings – Top 5 (click to enlarge) * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The First Trust NASDAQ Rising Div Achiev ETF (NASDAQ: RDVY ), the iShares Enhanced US Large-Cap ETF (NYSEARCA: IELG ) and the State Street SPDR Russell 1000 Low Volatility ETF (NYSEARCA: LGLV ) are excluded from Figure 1 because its total net assets are below $100 million and do not meet our liquidity minimums. Figure 2: Mutual Funds with the Best & Worst Ratings – Top 5 (click to enlarge) * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity. Sources: New Constructs, LLC and company filings The State Street SPDR Dow Jones Industrial Average ETF (NYSEARCA: DIA ) is the top-rated Large Cap Value ETF and the Fidelity Rutland Square Trust II: Strategic Advisers Value Fund (MUTF: FVSAX ) is the top-rated Large Cap Value mutual fund. Both earn a Very Attractive rating. The Guggenheim S&P 500 Pure Value ETF (NYSEARCA: RPV ) is the worst-rated Large Cap Value ETF and the Dunham Alternative Income Fund (MUTF: DAALX ) is the worst-rated Large Cap Value mutual fund. RPV earns our Neutral rating while DAALX earns our Very Dangerous rating. PACCAR Inc. (NASDAQ: PCAR ) is one our favorite stocks held by Large Cap Value ETFs and mutual funds and earns our Very Attractive rating. Since 2011, PACCAR has grown after-tax profits ( NOPAT ) by 10% compounded annually. During the same time frame, PACCAR improved its return on invested capital ( ROIC ) from 17% to a top quintile 21%. Despite the strong fundamentals, the stock is down 22% year-to-date, which has left shares undervalued. At its current price of $50/share, the company has a price to economic book value ( PEBV ) ratio of 1.0. This ratio implies that the market expects PACCAR’s NOPAT to never meaningfully grow from current levels. If PACCAR can grow NOPAT by 8% compounded annually for the next 10 years , the stock is worth $64/share today – a 28% upside. Unum Group (NYSE: UNM ) is one of our least favorite stocks held by RPV and earns our Dangerous rating. Since 2010, Unum’s NOPAT has declined by 17% compounded annually on the heels of NOPAT margin falling from 9% to 4% over the same time frame. The company currently earns a bottom quintile ROIC of 3%, which is well below the 8% earned in 2010. While UNM is down nearly 5% this year, shares remain priced for exceptional profit growth. To justify its current price of $36/share, Unum must grow NOPAT by 10% compounded annually for the next 17 years. This expectation seems overly optimistic given Unum’s inability to grow profits over the past five years. Figures 3 and 4 show the rating landscape of all Large Cap Value ETFs and mutual funds. Figure 3: Separating the Best ETFs From the Worst ETFs (click to enlarge) Sources: New Constructs, LLC and company filings Figure 4: Separating the Best Mutual Funds From the Worst Funds (click to enlarge) Sources: New Constructs, LLC and company filings D isclosure: David Trainer and Thaxston McKee receive no compensation to write about any specific stock, style, or theme.