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Executive Summary

Fundstrat’s GRNY, also known as the “Granny Shots” U.S. Large Cap ETF, is an actively managed exchange-traded fund designed to deliver long-term capital appreciation. The strategy combines a top-down fundamental research framework with a quantitative, bottom-up stock selection process. Only companies that align with at least two of Fundstrat’s identified investment themes are included in the portfolio, creating a focused yet diversified exposure to high-conviction ideas.

Fund Overview

Currently priced at $25, the fund maintains a low expense ratio of 0.75% and manages approximately $2.8 billion in total assets. Listed on the NYSE, the fund is managed by a seasoned team including portfolio managers Thomas J. Lee and Ken Xuan, alongside ETF product specialist Carrie Presley. The portfolio typically holds between 20 to 50 stocks, selected through a rigorous thematic approach.

Core Objectives

  • Identify the most important themes driving the economy and US market.
  • Select the best stocks benefitting from the tailwinds created by those themes.
  • Concentrate on a portfolio of large-cap equities driven by significant market forces.

Investment Guiding Principles

  • Focus on the long term
  • Consensus is usually wrong
  • Demographics are destiny (Thematic investing key)
  • Markets have an "age bias"
  • Don't fight the Fed
Fundstrat GRNY Holdings by Theme and Stock Overlap
Visual DataFundstrat GRNY Holdings by Theme and Stock Overlap

Thematic Focus

GRNY centers its portfolio around seven key investment themes, categorized into three shorter-term tactical themes and four longer-term structural themes. A stock must typically appear in at least two theme sub-portfolios to be included in the final GRNY holdings.

Short-Term Themes (6-12 Months)

  • Style Tilt: Captures shifts in market style preferences, such as value versus growth or cyclicals versus defensives.
  • Seasonality: Identifies recurring patterns in sector or industry performance during specific times of year.
  • PMI Recovery: Focuses on companies likely to benefit from an economic rebound signaled by improving Purchasing Managers Index data.

Long-Term Themes (3-5 Years)

  • Energy & Cybersecurity: Reflects the complex energy transition issues, geopolitical risks, and the rapid rise of cybersecurity threats.
  • Millennials: Targets demographic-driven shifts where millennial spending patterns outpace prior generations.
  • Global Labor Suppliers: Addresses labor shortages and demographic changes by favoring automation and AI solutions.
  • Easing Financial Conditions: Captures opportunities arising from a dovish Federal Reserve and more favorable financial conditions.

Investment Thesis — Strong Buy (long-term)

GRNY uses a broad macroeconomic data-driven approach to investing, integrating information from government agencies, the Federal Reserve, and private sources. The fund balances inflation-sensitive and inflation-resistant areas, using real assets and technology as hedges. It identifies opportunities tied to labor shortages, AI, and demographic shifts, such as the spending power of Millennials and Gen Z.

Theme Identification and Signal Generation

New themes are seeded using high-frequency signal screening (PMI data, retail sales, technology utilization) and validated through fundamental channel checks. The selection process combines quantitative scoring (relative strength, valuation dispersion, estimate revision velocity) with qualitative work including management interviews and peer benchmarking.

GRNY vs SPY 6-Month Performance Comparison
Visual DataGRNY vs SPY 6-Month Performance Comparison

Performance Analysis

GRNY has significantly outperformed the S&P 500 over the past six months, surging 33.28% compared to SPY’s 17.25%. The fund started to pull ahead in late April and maintained strong momentum through September. GRNY’s focus on structural themes like cybersecurity, energy security, and labor automation has proven resilient during periods of broader market pressure. With a concentrated portfolio of approximately 35 companies reviewed quarterly, GRNY can react swiftly to emerging trends.

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Risks and Considerations

As with any thematic strategy, GRNY faces specific risks:

  • Macro Signal Errors: Misreading economic indicators or crowding into popular themes.
  • Model Failure: Quantitative models may underperform under new market regimes.
  • Concentration Risk: Heavy exposure to specific stocks or styles can amplify drawdowns.
  • Operational Complexity: Active management requires high execution precision and risk oversight.

References