Monthly Portfolio Update: November 2021

November 17, 2021 EST

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This past month has been a busy one for decision makers around the world.  The G-20 wrapped up its annual summit in Rome, agreeing on key measures regarding climate change, global corporate tax, COVID-19, and ways to tackle inflation and logistical bottlenecks that have slowed down many economies. Even as world leaders are in the middle of COP26, setting new goals regarding climate change, oil prices have reached a high not seen in more than 10 years with traditional equities nearing all time high levels.[1]

On November 1st, following the Rome G-20 summit, the OECD announced[2] the introduction of a global minimum tax on business profits of 15%. It remains to be seen what the effects would be, especially digital tech firms that have benefitted from tax shelters such as Ireland, that joined the deal in the last hour.

Labor shortages continue, as the US experienced a historical rate of people leaving the workforce, especially women. Research by J.P Morgan[3] suggested that these frictions, which were expected to have been alleviated with the expiration of some unemployment benefits, persist, due to a combination of factors- higher income from current unemployment benefits than prior jobs, people retiring early, difficulties in hiring immigrant workers, increases in self- employment, and other. It is expected that many of the women who have left the workforce belong to this category as delayed school openings in the US have left many women in a difficult position in terms of child-care. The latest major trend is the re-evaluation of work for many in the younger generations. This drastic change has led to many waiting out until opportunities that fit their values present themselves. It will be interesting to see how this labor crisis will pan out during the next few months.

With the Fed announcing intentions to start tapering on November 3rd, we can expect to see signs of inflation to wind down and interest rates to rise in the coming months.

Profit taking trade on Avis (CAR)

  • AMOM took a 195.33% profit on CAR during a one-month holding period
  • CAR was the 6th largest position within AMOM on October 30th

Profit taking trade on DocuSign (DOCU)

  • AMOM completed third profit taking trade of DOCU in 2021 alone
  • 14% profit on DOCU during a one-month holding period
  • DOCU was up 8.3% in the month of October

PayPal (PYPL) widely expected to beat estimates and reverse downward trend

  • With the accelerating adaption of digital payments due to the pandemic, PayPal has been able to expand product lineup notably with Buy Now Pay Later, which was launched recently to compete with firms such as Affirm for the fast growing buy now pay later industry[4]
  • PayPal has seen 40% increase in Total Payment Volume (TPV) over the past year with over $331 billion as of last quarter[4,5]

MercadoLibre (MELI) enter top holdings with a weight of 3%

  • Argentina based firm widely labeled as the ‘Amazon’ of South America saw 103% growth in revenue from 2020 according to Q2 reporting[6]
  • In 2020, MercadoLibre’s payment arm Mercado Pago added 8 million accounts in Brazil alone, fueled by COVID-19[7], with goal to grow outside of Mercado ecosystem
  • Mercado’s combination of e-commerce, payment, and credit approaches is widely seen as a resilient strategy against global uncertainty

Moderna (MRNA) becomes third largest position

  • Moderna reported Q3 earnings miss on November 4th
  • Earnings report noted that many shipments scheduled for 2021 have been postponed to 2022 due to supply chain issues[8]
  • With supply chain issues having improved since the summer, it will be worth noting 2021 Q4 and 2022 earnings

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For current standard performance and expenses, visit www.qraftaietf.com/amom.

Coca Cola finalizes deal for BodyAmor[9]

  • Coca Cola (COKE) to acquire BodyArmor for $5.6 billion
  • BodyArmor is seen as Gatorade’s (owned by Pepsi) most serious competitor to date and seen as a challenge by Coca Cola for the sports drink sector
  • Represents Coca Cola’s largest acquisition to date
  • NVQ increases COKE position by 1.09%

Profit taking trades on big energy

  • Removal of positions of Chevron & Exxon the two largest positions in October
  • Energy industry may no longer represent value opportunities as share prices near all-time highs for many firms[1]
  • However, some firms may still provide value EOG Resources and ConocoPhillips (COP) remains as energy picks in NVQ portfolio
  • Reduction of position on COP by 0.47%

Return to financial sector holdings

  • NVQ notably had a less than 1% sector weight for financials in September and October
  • Return to financial sector with positions in Capital One (COF) and Berkshire Hathaway (BRK.B)
  • Financial sectors are the second-best performing sector in 2021 after the energy sector[10]
  • Fed announces tapering on November 3rd, predicted to benefit financial sector with possibly higher interest rates

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For current standard performance and expenses, visit www.qraftaietf.com/nvq

Increases in quality and momentum factors

  • Increase of momentum factor by 0.85% and quality factor by 2.91%

Decreases in value, size, and low risk factors

  • Decreases in low risk factor by 1.45%, size factor by 1.42%, and value by 0.88%

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For current standard performance and expenses,  visit www.qraftaietf.com/qrft

 

Overview

[1]  Hirtenstein, Anna. “Investors Buy Oil on Inflation Fears, Pushing Prices Even Higher.” The Wall Street Journal, Dow Jones & Company, 31 Oct. 2021, https://www.wsj.com/articles/investors-buy-oil-on-inflation-fears-pushing-prices-even-higher- 11635672603.

[2]  Hannon, Paul. “G-20 Backs Tax Overhaul That Makes Rich Countries Big Winners.” The Wall Street Journal, Dow Jones & Company, 30 Oct. 2021, https://www.wsj.com/articles/g-20-to-back-tax-overhaul-that-makes-rich-countries-big-winners- 11635586202.

[3]  Michael Cembalest Chairman of Market and Investment Strategy for J.P. Morgan Asset & Wealth Management , et al. “Help Wanted: J.P. Morgan Private Bank.” Private Banking & Wealth Management, J.P Morgan, 20 Oct. 2021, https://privatebank.jpmorgan.com/gl/en/insights/investing/eotm/help-wanted.

AMOM

[4]  Contributor Dave Kovaleski The Motley Fool. “How to Buy PayPal Stock for the Cost of A Penny Stock.” Nasdaq, Nasdaq Stock Market, https://www.nasdaq.com/articles/how-to-buy-paypal-stock-for-the-cost-of-a-penny-stock-2021-10-30.

[5]  “PYPL | PayPal Holdings Inc.. Analyst Estimates & Rating – WSJ.” The Wall Street Journal, Dow Jones & Company, https://www.wsj.com/market-data/quotes/PYPL/research-ratings.

[6]  Sreeharsha, Vinod. “A Covid-19 Silver Lining in Latin America: Millions of New Bank Accounts.” The Wall Street Journal, Dow Jones & Company, 24 June 2021, https://www.wsj.com/articles/a-covid-19-silver-lining-in-latin-america-millions-of-new-bank-accounts- 11624541884.

[7]  Investor Presentation - Investor.mercadolibre.com. Mercado Libre, https://investor.mercadolibre.com/static-files/ea485aff-b8e0- 48f9-a0f2-f22290afa8a5.

[8]  “Moderna Reports Third Quarter Fiscal Year 2021 Financial Results and Provides Business Updates.” Moderna, Inc., Moderna, https://investors.modernatx.com/news-releases/news-release-details/moderna-reports-third-quarter-fiscal-year-2021-financial- results.

NVQ

[9]  Maloney, Jennifer. “Coke to Pay $5.6 Billion for Full Control of BodyArmor.” The Wall Street Journal, Dow Jones & Company, 1 Nov 2021, https://www.wsj.com/articles/coke-to-pay-5-6-billion-for-full-control-of-bodyarmor-11635713140.

[10]  Solberg, Lauren, and Jakir Hossain. “Why Are Bank Stocks Doing so Well in 2021?” Morningstar, Inc., 19 Oct. 2021, https://www.morningstar.com/articles/1062281/why-are-bank-stocks-doing-so-well-in-2021.

Definitions

i. Based on MSCI USA Index, its parent index, which captures large and mid cap stocks of the US market. It is designed to reflect the performance of an equity momentum strategy by emphasizing stocks with high price momentum, while maintaining reasonably high trading liquidity, investment capacity and moderate index turnover.
ii. Measures value stocks using three factors: the ratios of book value, earnings, and sales to price. Constituents are drawn from the S&P 500
iii. The index includes 500 leading companies and covers approximately 80% of available market capitalization.

Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus or summary prospectus with this and other information about the Fund, please call 1-855-973-7880 or visit our website at www.qraftaietf.com. Read the prospectus or summary prospectus carefully before investing.

The Funds are distributed by Foreside Fund Services, LLC

Investing involves risk, including loss of principal. The Funds are subject to numerous risks including but not limited to: Equity Risk, Sector Risk, Large Cap Risk, Management Risk, and Trading Risk. The Funds rely heavily on a proprietary artificial intelligence selection model as well as data and information supplied by third parties that are utilized by such model. To the extent the model does not perform as designed or as intended, the Fund’s strategy may not be successfully implemented and the Funds may lose value. Additionally, the funds are non-diversified, which means that they may invest more of their assets in the securities of a single issuer or a smaller number of issuers than if they were a diversified fund. As a result, each Fund may be more exposed to the risks associated with and developments affecting an individual issuer or a smaller number of issuers than a fund that invests more widely. A new or smaller fund's performance may not represent how the fund is expected to or may perform in the long term if and when it becomes larger and has fully implemented its investment strategies. Read the prospectus for additional details regarding risks.


QRAFT AI-Enhanced U.S. Large Cap ETF: Companies in the health care sector are subject to extensive government regulation and their profitability can be significantly affected by restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure (including price discounting), limited product lines and an increased emphasis on the delivery of health care through outpatient services.

QRAFT AI-Enhanced U.S. Large Cap Momentum ETF: The Fund is subject to the risk that market or economic factors impacting technology companies and companies that rely heavily on technology advances could have a major effect on the value of the Fund’s investments. The value of stocks of technology companies and companies that rely heavily on technology is particularly vulnerable to rapid changes in technology product cycles, rapid product obsolescence, the loss of patent, copyright and trademark protections, government regulation and competition, both domestically and internationally, including competition from foreign competitors with lower production costs. Technology companies and companies that rely heavily on technology, especially those of smaller, less-seasoned companies, tend to be more volatile than the overall market.

QRAFT AI-Enhanced US High Dividend ETF: Securities that pay dividends, as a group, may be out of favor with the market and underperform the overall equity market or stocks of companies that do not pay dividends. In addition, changes in the dividend policies of the companies held by the Fund or the capital resources available for such company’s dividend payments may adversely affect the Fund. In the event a company reduces or eliminates its dividend, the Fund may not only lose the dividend payout but the stock price of the company may also fall.

QRAFT AI-Enhanced U.S. Next Value ETF: The value approach to investing involves the risk that stocks may remain undervalued, undervaluation may become more severe, or perceived undervaluation may actually represent intrinsic value. Value stocks may underperform the overall equity market while the market concentrates on growth stocks. The small- and mid-capitalization companies in which the Fund invests may be more vulnerable to adverse business or economic evens than larger, more established companies, and may underperform other segments of the market or the equity market as a whole. Securities of small- and mid-capitalization companies generally trade in lower volumes, are often more vulnerable to market volatility, and are subject to greater and more unpredictable price changes than larger capitalization stocks or the stock market as a whole.

Alpha – Alpha is a measure of the active return on an investment, the performance of that investment compared with a suitable market index.

AutoML – Short for Automated Machine Learning, AutoML is the automation of the machine learning process to make machine learning jobs simpler, easier, and faster.

Kirin API - Developed by Qraft’s data scientists, integrates multiple vendors to provide both macroeconomic and company fundamentals with the correct point-in-time data.