February 13, 2025
We are excited to introduce a new flavor of our “Thematic Thursday” cyclical, the Deep Dive, where we look through to the stocks and fundamental characteristics that are driving performance in the most notable thematic funds.
MILN: A Standout Performer over the Past 6-Months
We start our new feature with MILN, the Global X Millennial Consumer ETF. MILN has been an outperformer vs. the S&P 500 over the past 6 months and has a different profile than other “Aging” themed categories. The Millennial generation is generally in their prime earning years and the fund is distinguished by the prevalence of on-line and digital services companies that have shaped the way Millennials live.
We can see in the thematic comparison chart below that MILN is a standout performer vs. the “Aging” Category, and more importantly that it has managed to outperform during the current top line consolidation for equities.
The longer-term price chart of the fund itself (below) shows recent strength is developing in the context of a longer-term bear-to-bull reversal in performance. We typically look for charts with these characteristics such as stocks and funds that have been heavily discounted over a long period of time, usually exhibit sustained outperformance when buyers show high levels of enthusiasm. The weekly RSI study on the bottom panel of the chart recently hit above the 80 level which is a proxy for the enthusiasm we look for manifested as elevated momentum buying.
Comparative Fundamentals
Our friends over at ETFAction have a very useful fund comparison tool for ETFs, Mutual Funds, Closed End and SMA categories that rolls-up key fundamentals and allows comparison to a reference security. Below we compare MILN to the SPDR S&P 500 ETF Trust (SPY). The fund in aggregate has a growth-y profile, with valuation ratios showing a slight premium to the SPY, half the income, and similar efficiency. This puts the fund firmly in the “Growth” bucket as far as how we expect it to trade and, given our analytical framework, we would expect it to outperform when equities are trending higher against a backdrop of flat to lower interest rates, all other things being equal.
Technicals/Performance
Of the 86 individual securities currently held by MILN (Lagged holdings as of 2/12/2025), our technical process buckets 14 positions as long-term “Uptrends”. While 24 positions are charting as intermediate to long-term “Bullish Reversals”. Both price structures indicate strong buyer interest in the near-term. Uptrend patterns are a product of sustained outperformance over the long-term (as we measure trend based on price and performance relative to a benchmark or reference security). Bullish reversals are indicated by a minimum >10% excess total return above a benchmark return for a minimum 3-month period.
We believe our value add is respecting the technical buyer/seller dynamic for each security in combination with its fundamental attractiveness. When comparing performance to fundamentals, cheaper consensus earnings are not always sought after. Growth at the most conceptual level is about the perception of out-year earnings prospects. Against a market backdrop of optimism and rising prices, or pessimism and falling prices, those perceptions can vary widely as investor’s project and speculate.
In my former life on the buyside, a veteran PM who had run money for decades once quipped, “everyone basically tries to value companies at 20x their earnings, it’s just that nobody knows what the earnings number actually is for many stocks.” We think that sums up perception in a useful way.
MILN holdings in Uptrend price structure
Many of the stocks on this list, notably HIMS and SPOT, are near-term overbought. BKNG, DASH, LAUR and FI present as having the strongest fundamentals of companies passing this filter based on our metrics.
MILN holdings in Bullish Reversal price structure
AMZN and GOOG/L remain constructive in our work, though they are likely close to fully valued at present. XYZ (Block Inc.) still projects exponential forward growth among the stocks passing the filter while CARG, EXPE, DIS, GHC and VSCO also show some strong potential earnings Growth that isn’t fully priced in.
Conclusion
MILN occupies a sweet spot that encompasses consumer-oriented Growth stocks across the Market Cap. tiers with a significant allocation to Mega-Cap. Growth. As the Technology sector has seen momentum abate over the past 6-months, the fund has benefitted from a rotation towards Discretionary and Comm. Services stocks. Given the high concentration of Growth stocks we would expect this fund to outperform in bull markets with interest rates flat or falling.
Data sourced from FactSet Research Systems Inc. and ETFAction
