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 Q1 2021
Since the Fund’s inception on October 14, 2020, the Fund has continued to rise gaining 24.9% as of March 31, 2021 tracking the Emles American Manufacturing Index (AMERAMT). This return compares favorably to an 14.9% return delivered by the S&P 500 Index over the same time period as investors focused on multiple vaccine announcements and an U.S. Presidential election.
- Contributors: Primary metals products, heavy building material and aggregate products and food production.
- Detractors: General personal care and cleaning products makers, sanitary and personal care paper products and household cleaning products.
- Outlook: Food production, primary metals products, and heavy building material and aggregate products remain the top sectoral exposures. We continue to believe a “blue wave” may drive outperformance in value stocks going forward.
Quarter in review
- The Fund outperformed the benchmark, the S&P 500 Index, for the quarter ended March 31, 2021. Technology underperformed as investors shifted focus to value-oriented stocks with the thesis that vaccine announcements, future stimulus packages, and rising interest rates could disproportionately benefit companies with modest current valuations or those where cash flows are to be realized in the immediate term.
- An overweight position in Nucor Corporation (4.2% portfolio weighting) was a top contributor as investors rewarded the company for its announcement to expand operations. Pent up demand paired with rising steel prices, tight supply, and Biden’s announced infrastructure plan bode well for steel consumption going forward.
- An overweight position in Clorox Company (4.2% portfolio weighting) detracted from the Fund’s performance for the quarter, as investors continue to believe that vaccine administration and a return to pre-pandemic lifestyle could lead to less need for higher consumption of household products. Clorox continues to focus on ramping up manufacturing production to better meet demand and changes in consumer behavior.
- We continue to build conviction that the “blue wave” and Biden’s “Buy American” policies may drive outperformance in value stocks and the Fund going forward. We believe the stable dividend yields offered by such companies are being undervalued by the market. The portfolio is largely insulated from renewed COVID-19 restrictions and we expect demand to continue to be strong across the portfolio.
- Food production, primary metals products, and heavy building material and aggregate products remain the top sector exposures for the Fund.
- Food production (+): We expect potential inflation pressure, retracement of COVID-related volume and higher promotional intensity to negatively impact performance. However, more stability is expected once inventory levels normalize; investors may stand to benefit from relative valuation and yield potential.
- Primary metals products (+): Lack of supply has resulted in long lead times for U.S. flat steel, which in turn has increased prices to within 5% of all-time highs. Steel demand is expected to remain robust in 2021, with new supply expected to arrive during the year.
- Heavy building material and aggregate products (+): We expect that tight housing supply paired with a focus to increase infrastructure development will lead to high demand for heavy building material and aggregate products, especially for those companies with supply chains based within the United States.