ABOT targets companies generating substantial free cash flow while investing heavily in innovation — essentially profitable tech and growth companies that can fund their own R&D without diluting shareholders. This contrasts with typical innovation funds that often hold cash-burning startups.
How It Works
The fund screens for companies with both high free cash flow yields and significant R&D spending relative to sales, then weights holdings based on a proprietary innovation score. This methodology favors established tech giants and profitable healthcare companies over speculative growth stories. The portfolio rebalances quarterly to maintain exposure to companies balancing current profitability with future investment.
Key Features
- Focuses on self-funding innovators with positive cash flow, not venture-stage companies
- Combines quality metrics (FCF) with growth potential (R&D intensity) in stock selection
- Concentrated portfolio of typically 30-50 names versus hundreds in broad innovation indices
Risks
- Zero expense ratio suggests securities lending or other revenue sources that could create tracking differences
- Innovation scoring methodology could miss disruption from smaller, unprofitable competitors
- Heavy tech/healthcare concentration means 20-30% drawdowns possible in growth selloffs
Who Should Own This
Best suited for growth investors who want innovation exposure but are wary of profitless tech stocks — think of it as 'GARP for the innovation theme.' Works as a core growth holding for those uncomfortable with ARK-style speculation, or as a quality overlay for aggressive growth portfolios needing some cash flow discipline.