Granny Shots ETF Brings Multi-Theme Strategy to Market

A new exchange-traded fund is taking an unconventional approach to thematic investing by requiring stocks to score across multiple market themes before entering its portfolio.

The Fundstrat Granny Shots US Large Cap ETF (GRNY), which began trading Thursday on NYSE Arca, aims to identify stocks positioned to benefit from multiple structural market trends, according to Thomas Lee, head of research at Fundstrat and chief investment officer of Fundstrat Capital.

“What differentiates Granny Shots from other thematic ETFs is that it is not using the theme as the basis for someone to allocate capital. Instead, we have a dynamic set of what we've identified as structural themes,” Lee told etf.com in an interview. “When you make a macro decision, tactical allocation is more than 70% of the return.”

The fund stems from Fundstrat’s market research approach. According to Lee, understanding structural drivers and tailwinds has proven crucial for predicting how revenue, profits, and margins get generated in today’s market environment.

“We had many research clients tracking our granny shots portfolio, because it was it was available to our subscribers, and many of them found it unwieldy to be rebalancing every quarter,” Lee said. Many were advisors who asked the team to create some sort of investment product, he added.

How Fundstrat's GRNY ETF Works

The fund first identifies broad market trends, then uses data analysis to select individual stocks that fit those trends, according to its prospectus.

The strategy identifies stocks highly correlated with each theme through analysis of price movements, revenues, and capital expenditures, while also analyzing company transcripts to assess theme alignment, the prospectus explains.

Stocks must appear in at least two themes to qualify for the portfolio, which typically holds between 20-50 positions and rebalances quarterly, according to the fund’s fact sheet.

Current themes include millennials, energy/cyber security, Federal Reserve monetary policy, and global labor supplier—which Lee describes as “the basis for why there's so much demand for automation and AI.”

Meta highlights this approach, appearing in five theme styles, including style tilt, seasonality, millennials, global labor suppliers, and easing financial condition, according to Lee.

GRNY Holdings, Expense Ratio

The portfolio currently maintains allocations to industrials at 30%, information technology at 26%, and financials at 18%, according to the fact sheet. Top holdings include Tesla at 3.23%, Goldman Sachs Group at 3.22%, and JPMorgan Chase & Co. at 3.16%.

GRNY comes with an expense ratio of .75% and will invest at least 80% of its assets in U.S. companies with market capitalizations exceeding $10 billion, according to the prospectus.

Fundstrat has several new themes under consideration for introduction in the coming months, according to Lee, though the firm is “keeping it close to our vest” until 2025.

“Being thematic and trying to understand those key structural drivers early… are important because it helps us understand the world as it sort of starts to evolve,” Lee added. “Over the next two years, there are many things that are happening today that will have an impact on these things that are not necessarily covered by our existing themes now.”