🔍Quality Over Quantity: The CWS ETF Story

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Hello, ETF UNO Readers! Today, we will explore the AdvisorShares Focused Equity ETF (CWS), a compelling option for those interested in a concentrated approach to equity investing. This article will cover CWS’s strategy, historical performance, and how it may fit your investment goals. Let’s dive in!

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What is CWS?

CWS is an actively managed ETF focused on long-term capital appreciation through a concentrated portfolio of high-quality companies. Unlike ETFs that track broad indices, CWS selects only20-30 stocks with the best long-term growth opportunities.

Managed by AdvisorShares, CWS combines the benefits of active management with the transparency and liquidity of an ETF. The fund aims to achieve superior returns by investing in companies with strong fundamentals, competitive advantages, and sustainable business models.

One of the most distinctive aspects of CWS is its commitment to a true buy-and-hold strategy. While many funds frequently trade to chase performance or respond to market movements, CWS typically maintains low portfolio turnover. This approach offers several advantages:

• 💰Lower Transaction Costs: Less trading means lower costs passed on to investors

• 🧾Tax Efficiency: Longer holding periods can lead to more favourable tax treatment

• 💵Compounding Benefits: Allowing great businesses to compound returns over time

• ⌚Reduced Timing Risk: Less exposure to market timing errors

This patient, long-term approach aligns well with Warren Buffett's famous saying, "Our favourite holding period is forever." The fund's management team believes that the best action is often no action if you've identified exceptional businesses.

For investors considering CWS, it's important to understand how it might fit within a broader portfolio strategy. Given its concentrated nature, CWS is best viewed as a satellite holding rather than a core position for most investors. Some potential portfolio roles include:

• 📈Growth Component: Using CWS to add focused exposure to high-quality growth companies

• 📊Active Management Sleeve: Complementing passive index holdings with high-conviction active management

• 📜Strategic Long-term Holding: As part of a buy-and-hold strategy focused on quality companies

CWS at a glance

ETF Issuer: AdvisorShares

Inception: 2016-09-20

Asset Class: Equity

Underlying Index: CWS is an actively managed ETF

Geographical Focus: U.S.

Expense Ratio: 0.65% (as of last data point)

Dividend Yield: 0.56% (as of last data point)

Distribution Frequency: Annual

Historical Performance

Looking at CWS's track record since its inception in 2016, the fund has demonstrated its focused approach's potential benefits and risks.

• Performance has tended to be more volatile than broader market indices, reflecting the concentrated portfolio

• The fund has shown periods of significant outperformance during strong markets for quality growth stocks

• Drawdowns during market corrections have sometimes been deeper than the broader market

• Long-term returns have generally justified the higher volatility for patient investors

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest

1. True Active Management Unlike many ETFs that closely track an index or employ quantitative screens, CWS represents genuine active management with a high active share. Portfolio managers can invest where they see the best opportunities, unconstrained by traditional indexing requirements.

2. Quality Focus The fund's emphasis on high-quality businesses with strong competitive positions can provide some downside protection during market stress while offering upside potential. These companies typically have strong balance sheets, substantial free cash flow, and sustainable competitive advantages.

3. Transparency and Liquidity Despite its active approach, CWS offers the transparency and liquidity benefits of the ETF structure. Unlike traditional mutual funds, investors can see holdings daily and trade shares whenever the market opens.

Top 3 Reasons Not to Invest

1. Concentration Risk: Company-specific risks can significantly impact performance with only 20-30 holdings. A major problem at one or two portfolio companies could materially affect returns.

2. Higher Volatility: The concentrated portfolio typically leads to higher Volatility than broad market indices. Investors need to be comfortable with potentially significant short-term price swings.

3. Style Bias: The fund's focus on high-quality growth companies means it may underperform when value stocks or lower-quality companies lead the market.

💎CWS: When Less Is More

CWS offers a unique and compelling approach to equity investing. Its concentrated portfolio, focus on high-quality companies, and active management make it attractive for investors seeking long-term growth. However, its higher volatility and concentration risk may not suit everyone.

If you found this article informative and engaging, we invite you to join the ETF UNO community. Stay updated on the latest ETF trends, strategies, and insights to help you make smarter investment decisions. Whether a beginner or an experienced investor, ETF UNO is your go-to resource for all things ETF.

DISCLAIMER: This article is for informational purposes only and should not be considered as investment advice. Always conduct your own research and consult with a financial advisor before making investment decisions.