$HYLD holds 9 underlying ETFs ($SDAY$QDAY are the most recent additions) with 150 stocks in total. So why does it have the concentration of just 38? That’s what caught my attention when I dug into ALL its holdings. When I calculated HYLD’s effective number of stocks, I got just 38. In other words, despite holding 150 individual stocks, the weighting makes it behave more like a portfolio of 38 equally weighted stocks. And the concentration gets less income like and more growth like.... The top 10 stocks make up 40.7% of HYLD. The top 20? 65.6%... And the bottom 50 stocks? JUST 4% of the portfolio. So yes, HYLD owns a lot of stocks. But the number of holdings doesn't tell you much without looking at how they're weighted in the portfolio. Then theres the sector exposure...... Technology accounts for roughly 39% of the portfolio, with names like NVIDIA, AMD, Broadcom, Micron and Palantir among its major holdings. There's nothing inherently wrong with owning these companies. However, it does raise an interesting question about how diversified HYLD really is. Is it a diversified high income ETF...... or is it essentially a concentrated U.S. growth portfolio with leverage and a covered-call strategy layered on top? I dug into all of this in my latest HYLD ETF deep dive, along with its 12.5% yield, distributions, performance, fees, leverage and risk and answered some of the questions you asked. And I also built a custom benchmark to see how HYLD stacks up against a portfolio with similar characteristics AND leverage. https://youtu.be/dgUcuQmB48k If you were buying HYLD primarily for its monthly income, would this level of concentration change how much you'd be comfortable holding in your portfolio?
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23 Comments
ETF Go
@etf.go · 12h
The ‘growth’ or ‘income’ label has historically been applied to products based on the characteristics of the underlying holdings. Not the minority ‘overlay’ or whether a product pays a distribution. A distribution is a feature of a product. It doesn’t (shouldn’t) dictate the return characteristics of that product, its return profile or its categorization. Unfortunately this distinction has been lost recently with the misinterpretation of products on social media. Leverage - even if labelled ‘light’ - magnifies growth (positive or negative). IMO - HYLD should most certainly be viewed as a ‘growth’ product. 🤷♂️ I look forward to watching. 👍
David
@freedombydesign · 10h
Well done. As you mentioned costs matter over the long term and it’s one of the few things we as investors can control. And since we don’t know what the call premiums are actually earning costs matter even more.
Gus Hk@bond747 · 4h
I love your deep dive on the concentration of HYLD and I wish you could do a deeper dive on XEQT with 12000 plus in holdings and the top 20 holdings make up 25% ? I'm not good at math and I could use some help.
Canadian Investor@canadianinvestor · 4h
Great break down ! Lot of work to put something like this together.
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