Want To Invest In Founder-Led Companies Exclusively? There’s An ETF For That

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Businesses led by their founders receive significant attention on Wall Street and in academia. For instance, according to research by Bain & Co. published in Harvard Business Review:

“An index of S&P 500 companies in which the founder is still deeply involved performed 3.1 times better than the rest over the past 15 years.”

Similarly, Fidelity Investments also suggests that founder-led firms can benefit from a β€œcompetitive advantage.” For example, these companies are likely to suffer less from managerial myopia, such as cutting down on investments to meet short-term reporting goals.

Examples of Founder-Led Stocks

According to resources from InvestingPro, interested readers can rank founder-led companies based on several criteria. In the first instance, if we look at market capitalization (cap), we find Amazon (NASDAQ πŸ™‚ at the top of the list. Next come Tesla (NASDAQ πŸ™‚, Berkshire Hathaway (NYSE :), NVIDIA (NASDAQ πŸ™‚, Meta Platforms (NASDAQ πŸ™‚and many others.

In terms of most undervalued stocks whose companies are still led by their founders, we see the real estate data group CoStar (NASDAQ πŸ™‚; Meta Platforms; online fashion retailer Boohoo.com (OTC πŸ™‚; and Dell Technologies (NYSE πŸ™‚.

Investors who pay attention to analysts’ price targets would be interested to know that several stocks could potentially see significant upside from their current price levels. Those founder-led stocks include the clinical stage immuno-oncology company Allogeneic Therapeutics (NASDAQ πŸ™‚; biopharma name Ultragenyx Pharmaceutical (NASDAQ πŸ™‚; cloud communication platform Twilio (NYSE πŸ™‚; and comparison-shopping platform Lendingtree (NASDAQ πŸ™‚which specializes in consumer finance.

Among founder-led companies, shares of fastest growing stocks typically command a premium. According to InvestingProseveral high-growth names to focus on would be the real estate investment trust (REIT) Apartment Investment and Management (NYSE πŸ™‚; asset manager Blackstone (NYSE πŸ™‚; private equity group KKR (NYSE πŸ™‚; and car-buying platform Carvana (NYSE πŸ™‚.

Readers can also research the website further for finding shares that have had price pullbacks, those that are trading at relatively cheap valuation levels, or stocks with low beta values.

The universe of founder-led companies is large, and deciding on stocks that match individual portfolio objectives requires considerable due diligence. An alternative for many retail investors could be to buy an exchange-traded fund (ETF) instead. Today’s article introduces such a fund.

Global X Founder-Run Companies ETF

  • Current Price: $ 30.81
  • 52-week range: $ 26.50- $ 38.00
  • Dividend yield: 0.20%
  • Expense ratio: 0.45 per year

The Global X Founder-Run Companies ETF (NYSE πŸ™‚ invests primarily in mid- and large-cap businesses stateside that are led by founder CEOs. Fund managers highlight the importance of innovation and entrepreneurialism that such leaders may inspire in their companies. The fund started trading in February 2017.

BOSS, which tracks the Solactive US Founder-Run Companies Index, currently has 98 holdings. The top 10 stocks in the portfolio account for close to 17% of net assets of $ 13.1 million. In other words, BOSS is a small fund.

With regard to sectors, we see information technology (26.0), financials (19.1%), healthcare (17.4%), real estate (11.9%), consumer discretionary (7.9%), and communication services (7.3%), among others.

Energy groups Pioneer Natural Resources (NYSE πŸ™‚ and New Fortress Energy (NASDAQ πŸ™‚; basic materials company Westlake (NYSE πŸ™‚; steel producer and metal recycler Steel Dynamics (NASDAQ πŸ™‚; healthcare provider LHC Group (NASDAQ πŸ™‚; and local television and media company Nexstar Broadcasting (NASDAQ πŸ™‚ are among the leading names on the roster.

The ETF is down to 9.3% year-to-date and 5.1% in the past 12 months. Yet, BOSS saw a record price level in November 2021, after which many shares in the fund came under pressure.

In fact, on Feb. 24, the ETF hit a 52-week low. But since then, BOSS has returned over 12%. Meanwhile, P / E and P / B ratios currently stand at 30.94x and 3.76x respectively.

We like the diversity of BOSS. Readers who believe founding managers could help create long-term shareholder value should research the fund further.

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