Fundamentals First ETF (KNOW) seeks to track an index that selects companies based on fundamental financial metrics such as earnings quality, balance sheet strength, and profitability ratios. This actively-managed approach focuses on identifying undervalued stocks with strong business fundamentals across various market capitalizations and sectors.
How It Works
KNOW employs a quantitative screening process that evaluates companies using multiple fundamental criteria including return on equity, debt-to-equity ratios, earnings stability, and cash flow generation. The fund actively selects and weights holdings based on these fundamental scores rather than market capitalization. Portfolio rebalancing occurs quarterly to maintain alignment with fundamental rankings. Holdings typically range from 50-150 companies with position sizes determined by fundamental strength rather than market value.
Key Features
- Zero expense ratio makes it one of the most cost-effective actively-managed fundamental ETFs available to investors
- Recently launched in February 2024, offering exposure to a newer fundamental screening methodology and portfolio construction approach
- Provides 1.60% dividend yield while focusing on fundamental quality metrics rather than pure dividend-focused screening strategies
Risks
- This ETF can lose value if its fundamental screening methodology fails to identify truly undervalued companies or if value investing underperforms growth strategies
- Recent launch means no track record exists to evaluate performance during different market cycles, creating uncertainty about strategy effectiveness
- Concentrated holdings based on fundamental scores could lead to sector or style biases that underperform broader market indices during certain periods
Who Should Own This
Best suited for investors with 3-5 year time horizons seeking active fundamental analysis within an ETF structure. Medium to high risk tolerance required due to active management and concentration risks. Works as a satellite holding (10-20% allocation) for investors who believe fundamental analysis can outperform passive indexing strategies.