Javelin Funds, known as a pioneer of Shariah compliant ETF investing, has launched its second fund, the JETS Contrarian Opportunities Index Fund (JCO). The new fund seeks to provide exposure to stocks that appear to be temporarily out of favor but have relatively strong fundamentals (also see Five ETF Ideas For Contrarian Investors).
JCO will seek to replicate the performance of the Dow Jones U.S. Contrarian Opportunities Index, an equal weighted index consisting of 125 U.S. securities. Stocks are chosen semiannually from a broad market universe screened to identify securities ranked lowest by three-year trailing total return performance. From this pool of eligible securities, stocks are selected according to rankings by ten qualitative factors. “This fund advances the concept of index-based investing,” says Javelin president and founder Brint Frith. “Index funds often apply only quantitative criteria, such as market capitalization. The result can be a crudely-defined portfolio that makes no attempt at selectivity. We are impressed that Dow Jones has devised a benchmark that preserves the transparency and discipline of an index, but also encapsulates a well-researched investment strategy.”
The fund will charge an expense ratio of 0.58% and has a tilt towards mid-cap securities; its average component market cap is just $4.4 billion. JCO will initially be heavily focused on consumer services (30%) and health care (20.9%) while allocating minimal resources to telecommunications and basic materials which combine to make up less than 2.5% of the total assets.
Javelin’s only other ETF, the Dow Jones Islamic Market International Index Fund (JVS), tracks the Dow Jones Islamic Market International Titans 100 Index, which is maintained by Dow Jones and is based on a stringent and published methodology and consists solely of common stocks that meet Islamic principles. Due to this, the fund excludes companies that engage in any of the following; alcohol, conventional financial services (banking, insurance, etc.), casinos and gambling, pornography, tobacco manufacturers, pork related products, and weapons. JVS charges an expense ratio of 0.68% and it is up 2.7% this year and almost 22% over the past 52 weeks (see a review of faith-based ETFs here).
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Disclosure: No postions at time of writing