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OUSA’s Defensive Quality Positioning Shines Last Week

  • Last week, the ALPS | O’Shares U.S. Quality Dividend ETF gained 0.17%, outperforming the S&P 500 and Russell 1000 Value Index as volatility increased within U.S. equities amid rising long-term interest rates. OUSA’s overweight within defensive sectors, like Health Care and Consumer Staples sectors, helped propel the fund's relative outperformance last week, coupled with encouraging earnings within its quality-screened holdings.

  • Within OUSA’s Health Care sector, Gilead Sciences Inc. (GILD, 0.99% weight*), gained 3.78% after the company’s Phase 3 study of Trodelvy, which treats breast cancer, showed encouraging results in overall survival rates. Eli Lilly & Co. (LLY, 2.53% weight*) also rose nearly 5% after seeing a notable 4% increase in sales week-over-week for the company’s drug Taltz, which treats severe plaque psoriasis. Life science and diagnostic solutions provider, Agilent Technologies Inc. (A, 0.12% weight*), also gained over 3% last week, moving higher after beating 2Q earnings and boosting its full-year guidance, with management citing strong results due to the biopharma recovery in China.

  • Consumer Staples names in OUSA also had a strong week on the back of optimistic retail sales and earnings. Walmart Inc. (WMT, 0.65% weight*) rose 3.63% after reporting stronger-than-expected 2Q profit on a reduction in inventories and raising its full-year outlook (which had been previously lowered this year on weak retail sales expectations). Costco Wholesale Corp. (COST, 1.19% weight*) and Colgate-Palmolive Co. (CL, 1.01% weight*) both benefitted from Walmart’s improved consumer outlook last week, advancing 3.22% and 3.71%, respectively. Also posting better 2Q sales and earnings while maintaining its annual outlook was home improvement retailer, Home Depot (HD, 4.09% weight*), who gained over 2% last week alongside competitor, Lowes (LOW, 0.81% weight*), who increased over 2.3%.

  • Despite the lackluster week for tech stocks on rising interest rates, OUSA’s tech sector outperformed after Cisco Systems Inc. (CSCO, 2.05% weight*), which is the largest producer of enterprise networking equipment, jumped 4.48% last week after providing better-than-expected 4Q earnings and a bullish forecast for rising sales and reduced supply chain shortages in FY2023.

* Weight in OUSA as of 08/19/2022

“After a challenging April due to the COVID-related shutdowns in Shanghai and the impact on semiconductor and power supplies, overall supply constraints began to ease slightly at the back half of the quarter. While component supply headwinds remain, they have begun to show early signs of easing to help fulfill a record backlog of global demand.”

– Cisco Systems Inc. CEO, Chuck Robbins, August 17, 2022

Quality Companies Are Pulling Ahead of the Pack with Quality Earnings
  • A better-than-expected earnings season and full-year forecasts for the large-cap, quality companies in OUSA across a number of sectors have led to the fund outperforming the S&P 500 year-to-date by over 350 basis points (bps). With rising interest rates and hints of recessionary conditions in the global economy, OUSA’s quality methodology that focuses on high return-on-assets and low leverage with low volatility and high dividend yields is extremely pertinent for today’s risks in the market.

  • OUSA’s overweight to defensive sectors while avoiding more cyclical sectors that tend to carry high debt loads (Energy, Materials and Real Estate) has helped it achieve nearly 40bps of excess yield (trailing-twelve-month) relative to the S&P 500. This tends to make OUSA a good candidate to pair with any core equity allocation to possibly lower volatility and increase portfolio yields.
  • Despite the market typically “paying up” for high quality names during times of high volatility, OUSA exhibits a lower price-to-earnings ratio (P/E) in the majority of its allocated sectors and a lower aggregate P/E of 19.23x, compared to the S&P 500 Index P/E of 20.11x.

20220822-chart 


Performance Summary
  1 Week YTD 1 Y 3 Y
ALPS | O'Shares U.S. Quality Dividend ETF (OUSA) 0.17% -6.80 -0.67% 34.04%
O'Shares U.S. Quality Dividend Index1 0.18% -6.51% -0.17% 47.17%
Russell 1000 Value Index -1.18% -4.80% 0.83% 36.18%


Source: Bloomberg L.P., as of 08/19/2022

Performance data quoted represents past performance. Past performance is no guarantee of future results so that shares, when redeemed, may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. For current month-end performance call 1-866-759-5679 or visit www.alpsfunds.com. Performance includes reinvested distributions and capital gains.

For standardized performance please click here.

Performance data prior to 6/21/2022 reflects the performance of the Fund as managed under the OSI ETF Trust.

1The O’Shares U.S. Quality Dividend Index performance information reflects the blended performance of the FTSE USA Qual/Vol/Yield Factor 5% Capped Index through 5/31/2020 and the O’Shares U.S. Quality Dividend Index thereafter. 

Top 10 Holdings
Johnson & Johnson 5.19%   Verizon Communications Inc 3.78%
Procter & Gamble Co 4.95%  
Pfizer Inc
3.63%
Microsoft Corp 4.50%  
Lockheed Martin Corp
3.31%
Home Depot Inc 4.09%  
McDonald's Corp
3.21%
Apple Inc 3.93%   UnitedHealth Group Inc 2.84%


As of 08/19/2022, subject to change

Important Disclosures & Definitions

An investor should consider the investment objectives, risks, charges and expenses carefully before investing. To obtain a prospectus containing this and other information, call 1-866-759-5679 or visit www.alpsfunds.com. Read the prospectus carefully before investing.

Shares are not individually redeemable. Investors buy and sell shares on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 5,000, 25,000 or 50,000 shares.

Performance data quoted represents past performance. Past performance is no guarantee of future results; current performance may be higher or lower than performance quoted.

All investments are subject to risks, including the loss of money and the possible loss of the entire principal amount invested. Additional information regarding the risks of this investment is available in the prospectus.

Effective 6/17/2022, the O’Shares U.S. Quality Dividend ETF reorganized into the ALPS | O’Shares U.S. Quality Dividend ETF.

Concentration in a particular industry or sector will subject the Fund to loss due to adverse occurrences that may affect that industry or sector. The Fund may use derivatives which may involve risks different from, or greater than, those associated with more traditional investments. A Fund’s emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund’s purchase of such a company’s securities.

The Fund employs a “passive management” - or indexing - investment approach and seeks investment results that correspond (before fees and expenses) generally to the performance of its underlying index. Unlike many investment companies, the Fund is not “actively” managed. Therefore, it would not necessarily sell or buy a security unless that security is removed from or added to the underlying index, respectively.

FTSE USA Qual/Vol/Yield Factor 5% Capped Index: designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in the United States that meet certain requirements for market capitalization, liquidity, high quality, low volatility and dividend yield.

O’Shares U.S. Quality Dividend Index: designed to measure the performance of publicly-listed large-capitalization and mid-capitalization dividend-paying issuers in the United States that meet certain market capitalization, liquidity, high quality, low volatility and dividend yield thresholds. The high quality and low volatility requirements are designed to reduce exposure to high dividend equities that have experienced large price declines.
Russell 1000 Value Index: measures the performance of the large-cap value segment of the US equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values.

Basis Point (bps): a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.

Price/Earnings (P/E) Ratio: a valuation ratio of a company’s current share price compared to its per-share earnings

One may not invest directly in an index.

ALPS Advisors, Inc. and ALPS Portfolio Solutions Distributor, Inc., affiliated entities, are unaffiliated with O’Shares Investments.

ALPS Portfolio Solutions Distributor, Inc. is the distributor for the Fund.

Not FDIC Insured • No Bank Guarantee • May Lose Value


OUS000127 11/21/2022

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