Dhandho Junoon ETF Launches on NYSE Arca: JUNE

Looks like Pabrai launched his ETF - JUNE....

http://www.businesswire.com/news/home/20160420005847/en/Dhandho-Junoon-ETF-Launches-NYSE-Arca-JUNE

The ETF consists of 100 underlying equities that focuses on 3 of Dhando's funds / methods:
<ul>
<li>The first consists of cannibalistic companies (Share Buybacks)</li>
<li>The second consists of "the largest positions in the portfolios of certain value fund managers as reported in their quarterly 13F filings"</li>
<li>The thrid consists of companies that were spun off from their parents within the past several years (think Fiat / Ferrari)</li>
</ul>

Anyone interested? Is this what you were expecting for a Dhandho ETF?

James.

Comments

  • edited April 2016
    James,

    I'm super curious about this. Here is more info: https://www.dhandhoetfs.com/

    I've looked at the top 2 holdings and boy do they buy back a lot of shares...haha...

    I don't like the expense ratio (0.75%), but I seldom do..haha

    It's no secret that we tried to get Mohnish on. No luck so far, but perhaps we will with this one. If anything Hari waiting with him in line last Berkshire, so perhaps we can tag team him! So sorry for all of the lame jokes.

    I'm gonna dig more into the prospectus. I would love to discuss this on the mastermind group too.

    -Stig

  • Hey Stig,

    Just to echo your comment, I would love to hear you discuss on the next mastermind call, especially Toby's opinion given his interest in sponsoring a quantitative value ETF.

    I was a little surprised to see the "cloning" and "spinoffs" aspect of the ETF to be so small compared to the cannibals.

    Nick
  • Hi All,

    James - thanks so much for bringing this to our attention - I certainly would not have known without you!

    With regard to the strategies it employs, to get the analysis and discussion flowing these are my immediate thoughts:

    1. Share Buybacks - I beleive the data shows that companies that buybuy with conviction (measured by proportion of shares bought back) see share price apprecaition. From memory this was a topic discussed in this episode which might be worth another listen to better understand this aspect of the ETF - EP63: QUANT INVESTING – WITH PATRICK O’SHAUGHNESSY

    2. Cloning - I really like this idea - my concern is while long positions of these great managers are adopted what other positions do they also hold to work in concert with it? i.e. shorts! Given the ETF is headed by Mohnish Pabrai I am sure this is looked after. However, I would love anyone's thoughts on using the 13F filings of investors who use a variety of positions and instruments and how this may mask the true reason for being long on a certain stock.

    3. Spinoffs - "The third consists of companies that were spun off from their parents within the past several years" - my focus goes on the words "past serveral years" because, from memory, Joel Greenblatt in his book 'You Too Can Be A Stock Market Genius' discussed spin offs and I believe he found that companies that were spun off did best in their second year after being spun off. This leads me to the question - what has subsequent research found with regard to spin off performance with regard to time since incorporation?

    Looking forward to analyzing this ETF with everyone here.

    Kind regards,
    G
  • Ive just been burnt on Zinc Horsehead holdings...im going to hold my breath and see how Mohnish perfoms before jumping in boots and all.

    One thought / comment: sharebuybacks can be good for companies if done at the right time in each companies share price cycle. Id like to generalize and suggest/hypothesise that sharebuybacks in the currently massively overheated USA sharemarket is NOT one of those historical good periods. Personally I'd like to get more of an explanation of what Pabrai is trying to clone / achieve prior to plunging the house...
  • edited April 2016
    Hi Nick,

    Great call! This strategy (buybacks) appears to belong to markets with a low CAPE ratio.

    I think you hit on an important lesson with regard to not following great investors blindly. For example, I can't at all understand the purchase of PSX by Warren Buffet given it's a downstream business which profits from low oil prices, and which will suffer should the oil price rise. There is obviously more to it - time horizons for one probably. I too wonder what more there is to this buyback strategy....

    Thanks,
    G
  • Guys,

    When you get the chance you should read the prospectus. Scroll to the bottom: https://www.dhandhoetfs.com/junoon/fund

    There is good emperical evidence for all three approaches. I will go through them all no later than at the next mastermind meeting.

    I know that Hari is very excited too!

    -Stig
  • Thanks stig
  • Hi All,

    Thanks Stig, I had a look at the prospectus.

    I had some further thoughts on it, started writing a post and then I found this forum where they have already been discussing the ETF; there is some excellent analysis and commentary contained therein: https://www.bogleheads.org/forum/viewtopic.php?t=189689

    Kind regards,
    G
  • This is really exciting! I think there is some value to be had here.
    Consider that a guy can buy a value ETF for around 50 basis points.....one would be getting a fairly good bargain with the rescources and horsepower of Mr.Pabrai. This is bargain 25BP imo, it may be even less all things considered than the 20% of profits beyond 7%.

    I do wonder what their policy will be with ownership. Will they ever go above 10%, particiapte in any degree of activism, or own any company as a subsidiary.

    Regards,
    Colby
  • I wouldn't touch this ETF with a ten foot pole, for numerous reasons.

    1) "The second consists of the largest positions in the portfolios of certain value fund managers as reported in their quarterly 13F filings" When I read this I see it nothing more than a way for Pabrai to front run the ETF of his own creation, and benefit from the share price boost when the ETF has to buy whatever he just did.

    2) The expense ratio is too high (but then again I'm cheap and think anything higher than the 0.05% ratio of the VOO ETF is too high).

    3) I'm not impressed at all by Pabrai. He has had good success by running a highly concentrated portfolio of OTHER PEOPLE's value picks. This is very important, because so far from what I've seen his own original investment ideas have been extremely poor (his ZINC catastrophe showed an utter lack of analytical abilities). Reading his book was further conformation that he's unimpressive. The book advocates for being the copycat, which is exactly what he has done so far, and provides no original insight into investing. His book essentially cut and pasted Buffett's truisms from the annual letters with anecdotal stories and nothing of substance added.
  • Another thing with regard to investing on the basis the largest position of someone's 13F filing is that it may well be the largest position not because of conviction but rather because that particular position has had its thesis play out and it has reached its intrinsic value and my therefore be ready to be sold.

    I think Nick's point with regard to why exactly would you be buying back when the market is overvalued is the most pertinent - it just seems like a bad idea.

    The Truth, great post. With regard to point 3 I think Pabrai is unashamedly a copycat - he sees this as a strength rather than a weakness. Perhaps this depends on your philosophy on life:

    “Imitation is not just the sincerest form of flattery - it's the sincerest form of learning.”
    ― George Bernard Shaw

    Or

    “Parrots mimic their owners. Their owners consider that a sign of intelligence.”
    ― Marty Rubin
  • edited June 2016
    I agree that this is not a particularly attractive investment opportunity. I think launching this ETF whilst the markets are at elevated levels and unprecedented Central Bank/Government policy is distorting the markets and wider economy is not a good move. As Prof. Steve Keen and Credit expert Richard Vague have demonstrated extreme levels of private debt and growth in that private debt are setting up the global economy for a economic downturn. In a credit based economy expansion in private credit is required to stimulate economic growth and the private sector simply cannot take on anymore debt. Given the strong possibility of capital flight to perceicved safe havens( In my opnion these are likely to be the USD and Precious metals) in the event of a financial crisi launching this ETF now seems like an ill-timed move.

    I was very impressed with Toby Carlisle's reference to this in the recent podcast. His observations were very astute and his decision to wait till after the next crisis before launching his ETF is prudent in my opinion. I am far more inclined to put my capital in the hands of Mr Carlisle as his approach is simple, well reasoned and backed up by empirical evidence.

    With regards to Pabrai, he's certainly a very smart guy but intelligence can be a dangerous thing as it can lead to over-confidence in one's own abilities to out-smart the market or accurately predict future outcomes. Intelligence and wisdom are two very different things indeed.

    'We try more to profit from always remembering the obvious than from grasping the esoteric.' – Charlie Munger

    Regards

    Anaximander
  • Hi Anaximander,

    Great post mate, thanks!

    Did you read Toby's fact sheet contained within the survey? https://www.surveymonkey.com/r/AM_Website

    What are your thoughts on the proposed 100 positions? I don't understand this aspect given 20-30 is what he has on his Acquirer's Multiple screen. In addition from a lot of research 20/30 positions appears to be the best balance for e.g. volatility and managing unsystematic (i.e. company) risk etc.

    I recall Preston asking him about the quarterly (proposed for the ETF) vs annual rebalance (recommended when using this Acquirer's Multiple screen) - what are your thoughts on this and specifically the variation between the strategy recommended for the screen vs that proposed for the ETF?

    Wouldn't deep value strategies such as net nets be most resistant to economic meltdown? In this case while one would always want to be knowledgeable and informed about macroeconomic circumstances net nets present a solid investment strategy at all times?

    Kind regards,
    G
  • Hi there G,

    With regards to portfolio size, in the ETF fact sheet it lists 100 stocks as the basket size of stocks but in the interview Toby mentions he personally would opt for 30 stocks so I'm not sure which it will actually be. I think he is just floating the idea to see what feedback he gets from potential investors. Hopefully it will be a portfolio of 30 stocks. I'm not sure whether this will have to be expanded if the AUM grows too large to deploy into 30 positions but I don't envisage this occuring as the target market cap. is > $200 Mil.

    Regarding the rebalancing, Toby mentions that many of these deep value investments tend to be catalyst driven(Private Equity buyouts, activist investors etc) and as such are not tied to wider market movements. I guess this means that mean reversion is likely to occur fairly quickly closing the value gap and thus by rebalancing each quarter he ensures that the stratergy is allowed to function correctly. Given this is a Deep value approach the significant gains are made when the value gap closes as the investment community discovers the mispricing and it subsequently reverts to the mean.

    With regards to the Deep Value stratergy being resistant to economic meltdown. Whilst these types of stocks tend to be significantly undervalued and as such are less likely to suffer dramatic falls in market turmoil this cannot be considered a concrete rule. When major market panics occur logic goes out the window as emotions take over. Often flights of capital are sparked with whole asset classes being abandoned by the crowd as they seek safe haven. For this reason it seems prudent that Toby is proposing to hedge the portfolio at appropriate times to mitigate the risk of a major draw-down in the value of the funds holdings.

    If one is unconcerned with volatility then following the deep value stratergy consistently over time will clearly out-perform the market but there will be down years. Toby says that seeing a 40-50% draw-down sickens him and so he would prefer to hedge, I think this is sensible when running an ETF. If you are managing your own deep value portfolio and you are not concerned with major volatility then hedging is not essential but it may help you sleep better!

    Regards,

    Anaximnder
  • Hi Anaximander and friends,

    With regard to Toby and his Acquirer's Multiple (EV/Operating Earnings) I still cannot reconcile his stance with that set out in a book which he co authored in 2012, Quantitative Value (QV). Deep Value (his 2014 book); fundamentally the explanation of the types of companies/situations the Acquirer's Multiple would identify contains no quality metric. This diverges from the empirical evidence established in QV. How can a model be agnostic to quality and claim that the "cheapest of the cheap", the "ugliest or the ugly" outperform when 2 years earlier quality seemed to matter? Something doesn't quite add up to me.

    If you had two securities trading the the same discount to intrinsic value the Acquirer's multiple would be agnostic to the quality differential between the two securities. This doesn't make sense to me. QV showed that screening the lowest ranked decile by fundamentally the same value metric (EBIT/EV) and then splitting that decile by quality measures resulted in out performance of the securities that were of greater quality as opposed to the cheapest.

    I wrote about the divergence which I could not reconcile here - https://forums.theinvestorspodcast.com/discussion/4337/paralysis-by-analysis#latest

    My view is this - a Deep Value ETF backed by empirical evidence already exists - QVAL - as explained in the book Quantitative Value.

    Kind regards,
    G

  • Does anybody have any insight on what happened with JUNE Mohnish Pabrias quant ETF....I believe it's in liquidation. I think the same has happened for Tobias's ETF DEEPX?
  • @proudcolby

    DEEPX closed on March 14 and the liquidated proceeds were to be paid on March 30, 2017.

    JUNE will cease trading after tomorrow, June 26.

    Here is a link to the press release, although strangely enough it does not appear on the Dhando Funds Site.

    http://www.businesswire.com/news/home/20170615006403/en/Dhandho-Funds-Close-Liquidate-Dhandho-Junoon-ETF

    Apparently, the fund was only able to attract 3.3 million of capital. Just my opinion, but I think everyone should be wary of under capitalized, thinly traded ETF's. Once again, as I mentioned in my comments about DEEPX earlier this month, the lack of interest in JUNE shows the market is full of speculators, not investors and certainly not value investors.

    I thought JUNE was definitely interesting, but I noticed there were days when it traded at unusually wide spreads. I believe I saw a 15 to 16 point spread on one occasion and I was astonished. There was little to no volume on many days as well. At some point, I stopped checking on it. I was surprised to hear the news nonetheless..

    When Value does come back in vogue someday and it will, I hope Tobias Carlisle and Monish Pabrai will have offerings that are successful.
  • I stand corrected, Dhando Funds did post this supplement to the prospectus on their Site, which explains the closing of the fund and liquidation.

    Here is the link: https://www.dhandhoetfs.com/Data/Sites/13/media/docs/dhandho_supplement_6_16.pdf
  • I watched this last night, seems like a newer video. Pretty interesting stuff.


  • Thanks, I keep meaning to watch or listen to this talk but haven't got around to it. I needed a reminder. Glad you liked it.
  • So the underlying reason was it wasn't popular enough? I suppose you would need a fair amount of capital to support a team of quants with low fees like 50BP.

    Too bad because the funds popularity doesn't necessarily mean it was a bad idea.
  • " I suppose you would need a fair amount of capital to support a team of quants with low fees like 50BP."

    Why is there any need of quants after the model is created in the first place? I can't see any reason why quant funds should be more expensive than normal market cap index funds. Quant/factor funds are really just index funds...
  • I looked at it, but think it is expensive for what it is. It is long only in US equities. You can run something similar yourself for 0.00 basis points. If you make the trades on robinhood or something similar. 13f whale wisdom, as well as mutual fund holdings tell what you need to know.
  • Would be interested what the historic performance of the strategy is vs magicformula.com. Needs to be pretty good, because magicforumla plus robinhood are easy and free.
  • sorry www.magicformulainvesting.com
  • I hear robinhood is commission free; where do they generate their revenue then? Do they provide an inferior bid/ask to other brokers? anytime something is "free" I assume the cost is actually higher than alternatives because it is hidden somewhere.
  • I use robinhood and scottrade, don't see a major difference in terms of the price i get. Although i am not doing side by side comparisons. It might be there, but it is very hard to tell. The only reason i still use scottrade for some trades is that they list more securities. But for the types of names that are in these funds robinhood should have them. My understanding is that Robinhood make their money from margin debt. They also have a premium service which gives you margin debt plus after hour trades plus faster transfers. I did try it out actually. It is worth it, in some cases considering Scottrade is $14 to get in and out of one stock. Robinhood premium is $10 a month i think.

    Anyways getting back to the point, this fund is charging considerably more than the bid ask spread on a quarterly or even monthly re-balancing. Its actually administered by Cambria (Meb Faber's company), and i do use their funds. But even compared to Cambria's etfs this is overpriced in my view. GVAL buys global stocks, which is much harder to research and acquire from the US, and that charges .69 %. So really you are paying up for Monish's name being attached. Let's just call a spade a spade.
  • edited July 12
    Yes, it does seem expensive.

    In general determining if something is fairly priced (in terms of expense ratio) is quite complex in my opinion.

    E.g. Alpha Architect charge 0.79% for their funds - but I would pick IVAL (Alpha Architect) over GVAL (Meb's) because IVAL is for instance, is far more concentrated (40/50) stocks vs GVAL (145) holdings - so I would expect IVAL to outperform GVAL over time thereby making it cheaper on an absolute basis (after fee returns) rather than a relative basis (looking only at expense ratio) despite the fact that they are both "quant", "global" and "value" ETFs.
  • Interesting will need to have a look at IVAL, but my point remains .75 for US long only not for me. And for me I also think this is the wrong time to barge into US long only. Not saying sell everything, but currently one needs a pretty cautions selective approach. That is a separate subject tried to summarize my thoughts in a few posts:
    http://decision-maker-software.com/index.php/blog/story/id/Simple_Risk_Minimization_Technique
    http://decision-maker-software.com/index.php/blog/story/id/Simple_Approach_for_Rolling_Portfolio

    Also i am staying partially hedged.
    Overall, while i think passive is a great idea, i am not sure now is the right time to go all in on passive US long.

    Would be interested in Monish's own allocation. US vs Global vs other.
  • I could be wrong since i haven't research Vangaurd's active funds, but it looks like Windsor and Windsor 2, which i believe are actively managed are at .3% .
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