The Emles Made in America ETF (AMER) seeks investment results that correspond, before fees and expenses, to the price and yield performance of the Emles American Manufacturing Index, an index designed to provide exposure to U.S. equities, predominantly companies headquartered and focused on the production of goods within the U.S.
Performance summary of Q2 2021
Since inception, Fund positions have delivered 27.41% as of June 30, 2021. This return compares favorably to 24.51% total return delivered by the S&P 500 Index over the same time period as investors focus on the new administration and search for normalcy as the nation reopens.
- Contributors: Industrials and Materials
- Detractors: Consumer Staples
- Outlook: Food products, aerospace and defense, and mining remain top sector exposures. We continue to believe a “blue wave” may drive outperformance in value stocks going forward.
Quarter in review
The Fund outperformed the S&P 500 Index, for the quarter ended June 30, 2021. We believe that further reopening trends, future forms of stimulus, rising GDP, and higher real inflation could disproportionately benefit companies with modest current valuations or yet-to-be realized cash flows.
An overweight position in Nucor Corporation (4.6% portfolio weighting) was a top contributor as investors remain positive regarding the company’s balance sheet strength, near term capacity, and capability growth—underpinning higher normalized earnings potential and scope for capital returns given the ability to generate free cash flow in the current price environment.
An overweight position in the Clorox Company (3.8% weight) detracted from Fund performance as the company cut guidance on the back of gross margin contraction due to tapering order volume from new accounts added during the pandemic—implying lower demand for its products than previously forecasted.
We maintain conviction that the “blue wave” and Biden’s “Buy American” policies may drive outperformance in Fund positions and value-oriented equities. We believe that stable dividend yields offered by such companies are being undervalued by the market, and a shift in sentiment towards China from coexistence to dominance may create a requirement for the U.S. to strengthen its presence at home.
Food products, aerospace and defense, and mining remain top sector exposures for the Fund.
- Food products: We expect inflation pressure, retracement of COVID-related volume, and higher promotional intensity to negatively impact sector performance. That said, investors may stand to benefit from relative valuation and yield potential once inventory levels normalize.
- Aerospace and defense: As travel destinations reopen, net orders and uptick in air travel are positioned to rebound; we expect this industry to be least impacted by price increases in raw materials.
- Mining: As metal prices remain elevated, we believe underpinnings of strong pent-up demand, lagging supply, and low starting inventories to be tailwinds for the broader sector.