The Importance of Intangible Assets
Despite recent turbulence in the market, top blue-chip companies like Amazon, Apple, and Tesla have shown tremendous growth over the past decade, exponentially increasing their value and hence their stock prices.
Anyone who’s invested in these companies just five years ago should be sitting comfortably with their portfolios.
(Source – Yahoo Finance)
Past performance does not guarantee future results. The performance discussion of individual companies is for informational purposes only and does not represent the Fund. For NVQ top ten holdings, click here.
These companies share a few things in common. For one, they all possess a myriad of intellectual properties, like patents and copyrights, exceptional leadership and expertise, brand power, and a cult-like customer base.
Is there just one phrase that sums their commonalities up? Yes – Intangible Assets.
Significant intangible asset categories that these firms enjoy and exploit include intellectual properties, B2B rights, brand power, goodwill, data, non-competition agreements, business relationships, and public rights. Most people undermine the importance of these advantages.
As of September 2020, the value of intangible assets for the top 10 companies in the world was $10.8 trillion, according to the 2020 Brand Finance Global Intangible Finance Tracker. Given the technological advancements within the business paradigm, companies’ proportion of intangible assets are increasing substantially. In 1975, intangible assets represented only 14% of S&P 500 companies’ assets. In 2018, that percentage was at least 84%, according to Aon’s report on Intangible Assets Strategy, Capital Markets and Risk Management.
Value investors who have picked up on this trend are striving to analyze rising firms’ intangible assets and their prospective growth to invest in the next Amazon or Tesla, for the right reasons, as the significance of intangible assets seem undeniable. However, the results for value investing have been poor, to say the least. Beginning in the 1980’s, and especially after the 2008 financial crisis, value investing has been returning dull or negative results, largely due to inaccurate measurements of intangible assets.
Hence, some investors have been relying upon AI to calculate companies’ intangible assets and invest accordingly. Through machine learning, artificial intelligence can pick up important data in a plethora of fields and tries to produce accurate projections for stocks’ growth potential. The Qraft AI-Enhanced U.S. Next Value ETF (NYSE: NVQ) is an actively-managed ETF that invests in value stocks, depending on their intangibles. The AI model, by gauging intangible assets to in efforts to correct the traditional value metrics, is up 22.67% since its inception on 12/02/20 on the New York Stock Exchange until 3/31/21.
Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For current month end standard performance and expenses, www.qraftaietf.com/nvq.
Market Price: The current price at which shares are bought and sold. Market returns are based upon the midpoint of the last bid/ask spread at 4:00 PM Eastern Time.
NAV: The dollar value of a single share, based on the value of the underlying assets of the fund minus its liabilities, divided by the number of shares outstanding. Calculated at the end of each business day.
Annual Expense Ratio is 0.75%.