ETF Pulse Check Cambria Micro SmallCap Shareholder Yield ETF

The Cambria Micro & SmallCap Shareholder Yield ETF (MYLD) focuses on providing active exposure to U.S. micro- and small-cap companies that exhibit high shareholder yield. These companies are primarily selected based on their ability to return cash to investors through dividends, net share buybacks, and debt paydowns. The fund employs a quantitative algorithm to identify stocks that offer the best combination of shareholder yield and value metrics, resulting in a diversified portfolio of 100 to 300 companies. In today's economic environment, characterized by market volatility and heightened interest rate concerns, MYLD's strategy of targeting companies with strong cash distribution attributes is particularly relevant. Despite the challenges, the fund aims to deliver stable cash returns through active portfolio management and quarterly adjustments, ensuring alignment with its investment objectives.

Basic Information
The Cambria Micro & SmallCap Shareholder Yield ETF, known by its ticker MYLD, was issued by Cambria on January 4th, 2024. The ETF carries an expense ratio of 0.87%, reflecting the costs associated with its active management strategy. Among its top holdings, CVR Energy (CVI) accounts for 1.37% of the portfolio, followed closely by REV Group (REVG) at 1.35%, and ODP (ODP) at 1.27%. The fund's largest sector exposure is to Consumer Discretionary at 4.84%, with additional allocations to Energy (2.49%), Financials (2.3%), and Information Technology (2.28%). MYLD's net flow ratios over the past 7 and 30 days were 0.02% and 0.60%, respectively. However, the fund's average returns over 6 months, 1 year, and 3 years have been negative, at -9.44%, -9.14%, and -3.37%, respectively. The volatility, as measured by return standard deviation, has been moderate, with a 1-year max drawdown of 0.999%, indicating significant risk exposure.

News Summary
Recent developments in the Consumer Discretionary sector, a significant component of MYLD's portfolio, have shown mixed results. Despite some underperformance, analysts remain optimistic about certain stocks like Norwegian Cruise Line. Broader sector trends indicate a decline in the Consumer Discretionary industry by 1.6% over the past six months, contrasting with the S&P 500's gain of 6.2%. In macroeconomic news, geopolitical tensions and tariff threats, along with rising inflation rates in Sweden, could impact global interest rate trends and, consequently, the financial performance of small-cap companies. Furthermore, Japan's declining real wages suggest potential economic weaknesses, which could influence investor sentiment and market volatility. These factors highlight the importance of monitoring economic indicators and sector-specific developments.

Analyst Rating: Strong Sell
The Cambria Micro & SmallCap Shareholder Yield ETF (MYLD) exhibits multiple concerns across key evaluation dimensions, warranting a "Strong Sell" rating. The fund's average returns over 6 months, 1 year, and 3 years are notably negative, indicating substantial underperformance compared to broader market indices. Additionally, the expense ratio of 0.87% is relatively high, diminishing the fund's cost efficiency. While the 30-day net flow ratio shows some positive investor interest, the minimal 7-day net flow ratio suggests potential volatility. Although the ETF demonstrates diversified holdings and balanced sector weights, the overall high costs and underwhelming performance overshadow its few positives.

Backtest Scenario
A backtest of the Cambria Micro & SmallCap Shareholder Yield ETF (MYLD) during the 2018 U.S.-China trade tensions is not feasible due to the ETF's lack of historical data. However, examining the performance of small-cap stocks during this period provides insights into potential impacts on MYLD. Small-cap stocks generally underperformed due to increased volatility and a shift towards quality assets, while defensive sectors like Healthcare and Consumer Staples fared better. The ETF's focus on shareholder yield might have offered some resilience, but its emphasis on small-cap stocks likely resulted in disproportionate challenges during the trade tensions.

Risk Outlook
The Cambria Micro & SmallCap Shareholder Yield ETF (MYLD) faces various forward-looking risks, including exposure to macroeconomic fluctuations and consumer sentiment shifts. The ETF's substantial allocation to Consumer Discretionary stocks makes it susceptible to economic indicators such as rising inflation and geopolitical tensions, potentially impacting consumer spending. Additionally, higher interest rates could strain small-cap companies' financial performances. Despite the ETF's modest market liquidity risk, as indicated by its net flow ratios, broader market volatility could pose challenges. Investors should continue to monitor macroeconomic developments that could affect MYLD's future performance.

Conclusion
The Cambria Micro & SmallCap Shareholder Yield ETF (MYLD) offers a unique investment case for those interested in small-cap stocks with high shareholder yield characteristics. However, given its historical underperformance and high expense ratio, the ETF better suits aggressive investors willing to accept higher risks. Monitoring economic indicators and sector-specific trends remains crucial for assessing MYLD's potential resilience amid market volatility.