Humilis Investments' Brian Belski launches HIS, a new ETF

Key Concepts

• Concentrated Portfolio Strategy: A methodology focusing on a limited number of high-conviction stocks (45–50) rather than broad index replication.
• Top-Down Analysis: An investment approach that evaluates macroeconomic factors (valuation, earnings growth, operating performance, and technicals) before selecting individual stocks.
• Tracking Error: The divergence between the price behavior of a portfolio and its benchmark (S&P 500); used here as a tool to outperform by avoiding sector-skewing giants.
• Large-Cap Focus: A strategy prioritizing established, high-market-capitalization companies.
• Expense Ratio: The annual fee charged to investors; in this case, 54 basis points (0.54%).

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1. Main Topics and Strategy

Brian Belski, founder of Cumulus Investment Strategies, introduced his new ETF (ticker: OKAY). The fund is designed to outperform the S&P 500 by utilizing a concentrated portfolio of 45 to 50 stocks.

• Methodology: The strategy relies on a "top-down" model that evaluates valuation, earnings growth, and technical sector performance.
• Portfolio Construction: While the fund aims for representation across all sectors, it is not strictly required to hold every sector. The portfolio is heavily weighted toward large-cap stocks (e.g., Apple, Amazon, Tesla, Visa, Walmart).
• Performance Philosophy: Belski argues that "diversification is the enemy of performance," suggesting that by narrowing the focus to a concentrated set of high-conviction names, the fund can achieve superior returns compared to the broader index.

2. Sector Selection and Real-World Applications

Belski provided specific insights into why certain companies are selected over others:

• Consumer Discretionary: The sector is often skewed by giants like Tesla and Amazon. To manage this, Belski selects names like Marriott for its brand strength and operational excellence, allowing the fund to avoid the volatility or "tracking error" associated with the massive weightings of the tech-heavy giants.
• Airlines: The fund prefers Delta as the "best airline overall," while holding others like United in different, mid-cap-focused portfolios.
• Utilities: Despite being a sector often ignored or underweight in many portfolios, Belski’s fund is currently overweight in utilities.
• Consumer Staples: The fund is selective, favoring Costco as the primary name in the sector.

3. Market Perspective and Implementation

• Bullish Stance: The portfolio is inherently bullish, reflecting Belski’s written research. He emphasizes that as a former strategist for major banks, he maintains a strict discipline: "You write about it first, and then you implement it into the portfolios."
• Mag-7 Positioning: The fund is currently neutral on technology and does not own every stock in the "Magnificent Seven," which Belski notes has actually contributed to their recent outperformance.
• Flexibility: Unlike some rigid index funds, this strategy allows for active management, meaning the team can move in and out of positions based on their ongoing analysis.

4. Notable Quotes

• "Diversification is the enemy of performance." — Belski, referencing the philosophy shared by investors like Warren Buffett and David Tepper to justify a concentrated portfolio.
• "We’re not the smartest guys at the table. All we try to do is provide our investors... with solutions." — Brian Belski, on the collaborative nature of launching the ETF with partners like ETF Architect.

5. Synthesis and Conclusion

The OKAY ETF represents a shift from traditional, broad-market index investing toward a concentrated, active management style. By leveraging over 30 years of top-down valuation modeling, Belski aims to beat the S&P 500 by avoiding the "noise" of index-heavy stocks and focusing on high-conviction, large-cap names. With an expense ratio of 54 basis points, the fund offers a specialized, transparent, and bullish approach for investors seeking to outperform the market through disciplined, sector-specific selection rather than passive diversification.