Nasdaq Trade Talks: WisdomTree U.S. Growth and Momentum Fund

Jill Malandrino: Welcome to Nasdaq Trade Talks. I'm Jill Malandrino, Global Markets Reporter at Nasdaq. Joining me is Kara Marciscano, Research Associate with WisdomTree. Kara, it's great to see you again. Welcome back to Trade Talks.

Kara Marciscano: Thank you so much for having me.

Jill Malandrino: All right. Let's talk about the WisdomTree U.S. Growth and Momentum Fund.

Kara Marciscano: Yes, so last week, WisdomTree launched the WisdomTree U.S. Growth and Momentum Fund. The ticker is W-G-R-O, WGRO. We launched the strategy in partnership with O'Neil Global Advisors. It's a firm with a significant legacy as a growth investment manager, and I would love to dig into the details with you.

Jill Malandrino: And we would love to learn about them. Tell us about stock selection and methodology.

Kara Marciscano: Yeah, sure. Just to provide a little bit of background, it's designed to be a solution and it's a solution for growth investors, because some of the primary challenges that they face are identifying early stage growth stocks and then exiting them before they have a drawdown. What we're doing is partnering with O'Neil and using their proprietary, fundamental, and technical factors to identify those stocks that have high growth characteristics, but are unlikely to have near-term drawdowns. Then once they reach an extended point, we're exiting them. Those four fundamental factors are pullback, which is a momentum factor. So, think about finding stocks that are having positive price returns. The second factor is volatility, which is, relatively straightforward, reducing some of that noise that growth investors can experience with stocks that are jumping up and down. Data graph, which is, your composite growth fundamental factor. So, identifying stocks with leadership fundamentals. Then lastly, hotness, which is a gauge of speculative interest in a stock. So, is there a lot of speculative interest in a stock? It's unlikely to be a long-term interest in a stock and they're likely to fall near-term.

Kara Marciscano: Once we have a grade on each of those four factors, we're picking the top 50 to a hundred stocks based on those four ratings and essentially equally weighting them. It's not perfectly equally weighted, but it's approximately an equally weighted portfolio. Today, there are 70 names in there.

Jill Malandrino: Kara, explain to us how it performs for investors if you're in a positive market environment and if you're new negative market environment.

Kara Marciscano: Great question. In short, in positive returns environments, we expect to outperform broader benchmarks like the S&P 500. In a drawdown environment, we would also expect to outperform. The reason why in a positive environment we would expect to outperform is we are selecting stocks with growth characteristics through that data graph proprietary factor. That's a fundamental factor from O'Neil Global Advisors. In periods of normal to moderate economic growth, we think we're going to pick the market leaders with that data graph rating. Now, in a drawdown environment, which is very specific to this strategy, is avoiding those technically extended stocks. So, the technical factors like pullback, volatility, and hotness are going to help us find those names that are likely to experience greater drawdowns, so we can exit them earlier and reduce some of the volatility and negative returns that typical growth investment strategies become very prone to.

Jill Malandrino: All right, Kara. Appreciate the insight. Thanks for joining us on Trade Talks. I'm Jill Malandrino, Global Markets Reporter at Nasdaq.

Kara Marciscano: Thank you so much.

WGRO seeks to track the price and yield performance, before fees and expenses, of the O’Neil Growth Index

Kara Marciscano is a registered representative of Foreside Fund Services, LLC.