Nasdaq and GraniteShares Team-Up To Offer A More Concentrated Approach To Investing In Innovation
Nasdaq has created an index that provides a new way to invest in companies that are leaders in disruptive innovation, and investors can now participate via an exchange-traded fund from GraniteShares. The GraniteShares Nasdaq Select Disruptors ETF (DRUP) tracks the recently launched Nasdaq US Large Cap Select Disruptors™ Index (NLCSD™).
The current interest rate tightening cycle undertaken by the U.S. Federal Reserve has changed the landscape for innovation investing. Investment strategies focused on unprofitable technology companies are extremely challenged in today’s environment. Simply put, the game for innovation investing has changed and now calls for a new approach. Quality companies with strong moats such as valuable patent portfolios, strong revenue or margin growth are increasingly sought after as the top disruptors.
The NLCSD index is designed to track 50 of the most disruptive, large-cap innovative companies in the U.S. The index’s methodology is distinct from other indexes that track the thematic innovation space in that it employs a multi-factor approach incorporating the three stages of the S-curve theory of business model lifecycles: Infancy, Expansion and Maturity.
In order to quantify the fundamental strength of companies across all three stages of the disruptor lifecycle, Nasdaq’s multi-factor ranking system scores each security in NLCSD’s eligible universe on six unique metrics to derive an aggregate Disruptor Score:
1) Patent Value as a % of Full Market Cap – measured as the ratio of a firm’s patent value to the security’s full market capitalization.
2) R&D Expenses as a % of Annual Sales – measured as the ratio of annual R&D expenses (over the past 12 months) relative to annual sales over the same period.
3) Revenue Growth – measured as the % change of annual sales (over the last 12 months) between the most recently completed period and three years prior. Securities must have positive revenue for the prior three years minimum to be considered for inclusion.
4) Gross Margin Growth – measured as the % change of the average gross margin over the last 12 months (LTM) between the most recently completed quarter and three years ago. Securities must have minimum prior three-year positive LTM gross margin for inclusion.
5) Average Gross Margin – measured as the average quarterly gross margin over the trailing 13 quarters leading up to the index reconstitution reference Date.
6) Gross Margin Sharpe - measured as the ratio of a firm's average quarterly gross margin to the standard deviation of a firm's quarterly gross margin over the trailing 13 quarters leading up to the index’s reconstitution reference date.
The index’s methodology incorporates both patent valuation estimates and traditional financial data around R&D expenditures to find the most innovative companies in the U.S. large-cap universe.
The GraniteShares Nasdaq Select Disruptors ETF is a way to own a curated portfolio of the top 50 disruptive companies in the U.S. market as measured by Nasdaq.
Disclaimer:
Nasdaq® is a registered trademark of Nasdaq, Inc. The information contained above is provided for informational and educational purposes only, and nothing contained herein should be construed as investment advice, either on behalf of a particular security or an overall investment strategy. Neither Nasdaq, Inc. nor any of its affiliates makes any recommendation to buy or sell any security or any representation about the financial condition of any company. Statements regarding Nasdaq-listed companies or Nasdaq proprietary indexes are not guarantees of future performance. Actual results may differ materially from those expressed or implied. Past performance is not indicative of future results. Investors should undertake their own due diligence and carefully evaluate companies before investing. ADVICE FROM A SECURITIES PROFESSIONAL IS STRONGLY ADVISED.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
