ETF Expert Corner

Hal Lambert Spotlights Point Bridge GOP Stock Tracker ETF (MAGA)

January 2nd, 2018 by ETF Store Staff

Hal Lambert, Founder & CEO of Point Bridge Capital, spotlights the Point Bridge GOP Stock Tracker ETF (MAGA) and explains the merits of “politically responsible investing”.



Transcript

You can listen to our interview with Hal Lambert by using the above media player or enjoy a full transcription of the interview below.

Nate Geraci: The ETF we're spotlighting this week is the Point Bridge GOP Stock Tracker ETF, ticker symbol MAGA, great ticker symbol - of course, a reference to President Trump's “Make America Great Again” slogan. Joining us via phone from Fort Worth, Texas to discuss this ETF is Hal Lambert, Founder and CEO at Point Bridge Capital. Hal, happy new year to you and welcome to The ETF Store Show.

Hal Lambert: Thank you very much. Happy new year to you as well.

Nate Geraci: Hal, before we get to the ETF, you have a very interesting background. You served on the Inaugural Committee for President Trump, you were the Finance Chair for the Texas GOP. You also served as a National Finance Chair for presidential campaigns in both 2012 and 2016. Give us your back story here. How did you get involved in politics and then what led you to starting Point Bridge Capital?

Hal Lambert: Oh good, thank you. I appreciate you having me on. Yeah, I've been involved in politics for over a decade, and mostly on a national level, but as you mentioned, I was also the Finance Chair for the state party here in Texas, the GOP state party. I've helped a number of candidates. I did help Senator Ted Cruz in his first presidential run. I was a National Finance Chair for him. Also worked in the Super PAC area. But I've been involved in the investment world as well, for over 20 years. So I've really done both. The political side of it is more of an interest side of it, and then on the investment side, that's been my profession.

Nate Geraci: Well, let's talk about the ETF. It's the Point Bridge GOP Stock Tracker ETF. Again, ticker symbol MAGA. Tell us how you came up with the idea for the ETF and then walk us through exactly what this ETF is designed to do.

Hal Lambert: It's a good question. As I mentioned, I've been involved in the investment business for a long time. I've had my firm now, Point Bridge Capital for coming up on five years. Prior to that, I worked with a couple different Wall Street firms and also on the hedge fund side. So what I noticed was, on the investment side of it, that there's been a lot of activism that's been going on, really from the corporate side of things. There's been a lot of activism with CEOs of major companies taking stands and talking about things that really don't have anything to do with their companies. They've become very political. You've seen that in so many, like Disney with ESPN. ESPN created a lot of controversy obviously over the last few years going very political. You've seen it with Starbucks. You've seen it with Target. And so, what I saw out there was people that were upset, investors that were upset, maybe were boycotting a particular company. They weren't going to go to Target anymore for whatever reason, or Starbucks. Or they were turning off ESPN. And what I realized, they didn't understand that they may own those stocks in their mutual funds. And so they're boycotting on the one side and they're losing money inside their mutual funds on the other side. And so that was kind of what was the catalyst for me to look at this and go, "Well, how do you enable investors to invest based on political beliefs?" And it had never been done, no one's done this before. And so based on my background both on the investment side and the political side, I kind of thought through this and was like, "Well, how do you decide if a company is conservative or is helping out politically with your interests?" And I think the number one way to do that is through looking at the money and following the money. And so I started looking at - I hired a data scientist to screen the data for the political contributions of the companies, their PACs and their employees, because money matters in politics. And so, when you're looking at that, it's very clear and you can see the data, what companies are supportive of Republicans and what companies are supportive of Democrats. And that's what really was the catalyst for this.

Nate Geraci: So can you tell us a little bit more about the screening process itself? What's the universe of stocks that this ETF draws upon? How many holdings are in the ETF, how often is it rebalanced?

Hal Lambert: Yeah, exactly. So what I did was, I took every company that's in the S&P 500, I screened it for the political contributions of the PACs and the employees - and that data is reported to the Federal Election Commission so you can look at that data and see it - and then I ranked the companies based on their contributions. And I looked at the net political contributions to Republicans and Democrats dollar wise as well as percentage wise. And I took the top 150 companies that support Republicans and I equally weighted them and created the GOP Stock Tracker Index, which became the ETF. And so that's really the way it's done. And again, the companies are equally weighted, it'll always be 150 stocks in the portfolio, and it's going to be always S&P 500 companies.

Nate Geraci: And Hal, to be clear for our listeners, the companies included in this ETF, they don't necessarily stand to benefit from a Republican agenda, it's just that they're highly supportive of Republican candidates. Is that correct?

Hal Lambert: That's correct and I think the way to think about this too is we wouldn't have these tax cuts right now if Hillary Clinton had won the presidency. We wouldn't have the tax cuts if the Democrats controlled either the House or the Senate. And so when you're thinking about that and you're looking at it from an investment perspective, I think it's important for the types of policies that people want conservative, Republican policies, we need to have Republicans controlling the House, the Senate, and the Presidency. And so that's really what's driving this, because these companies are making a difference. This matters. There's millions and millions and millions of dollars being put out there for helping elect candidates to office.

Nate Geraci: Our guest is Hal Lambert, Founder and CEO at Point Bridge Capital. We're spotlighting the Point Bridge GOP Stock Tracker ETF, ticker symbol MAGA. Hal, you mentioned the word activism earlier, and it's interesting because as I think about this ETF, it's really not that different than some of the ESG or socially responsible ETFs where you see companies either included or excluded based on certain criteria. I'm curious, do you think that's a good comparison in terms of what you're trying to do, just more on the political side of the equation?

Hal Lambert: I do. I do think it is. And I think you look at the ESG side, those are almost all basically left. Those are basically Democrat left type of funds. So they're excluding. They don't want oil and gas. They don't want companies that they feel are not friendly to the environment. And again, quite frankly a lot of that is an opinion. I would say that a lot of the companies they view are not friendly to the environment would say they are friendly to the environment. One thing I'm doing differently is this is not an opinion based fund, so it's not me deciding, "Hey, this company is conservative or this company is Republican supporting." It's strictly based on the data. And so, I do think that's a difference as well.

Nate Geraci: Hal, on the socially responsible or ESG ETF side, there is a lot of debate surrounding whether you're getting potential outperformance there or you're just investing along with your beliefs. And I'm just curious, on this particular ETF, other than expressing a political view, is there an additional investment case here in terms of potential outperformance? I know you mentioned the tax cuts earlier, but is there any data here that may support the potential for outperformance?

Hal Lambert: Yeah. Well first, just so everybody knows, this launched September 7th of this year. And again, the ticker is MAGA. It's done extremely well. It's outperforming, it's up about 12% since the launch in September. The companies in this portfolio are great companies. And you'd be surprised. What's interesting is people don't realize what companies are in here. As an example, Goldman Sachs is a big Republican net donor. They're in the portfolio. The portfolio right now is about 21% industrials, so you're talking about companies like Lockheed, Boeing, Caterpillar. 21% in financials. So a lot of the banks. 17% in energy. And so those are the top three sectors. And of course, basically zero in ... Certainly zero in Silicon Valley tech. But basically zero on that pure tech side. So I think from a positioning standpoint, this is easily a core holding I think for investors. And I think the companies inside of it, once people see them, will realize, "Hey, these are really good stocks." And again, it's launched. It's outperforming. I did back test this. I can't market back-tested performance, but from a back-testing standpoint, it looks really good to me as well. So I feel very, very comfortable with people looking at this as a core type position.

Nate Geraci: Hal, as I was researching this ETF, one of the sort of push backs I've see to this strategy is that companies tend to make contributions to whoever's in power. In other words, if Republicans are in control, companies donate to Republicans. If it's Democrats, that's who gets the lion's share. I think at the end of the day, the thought is every company just wants a seat at the political table. Do you think that's accurate and, if so, how might that impact this ETF?

Hal Lambert: Well, I think it's accurate for some companies, but there's a clear spread or a clear difference here within this portfolio. So companies that were just giving 50% to both sides and they were basically equaling out what they were giving, that's not what's in this portfolio. What's in this portfolio are the companies that are giving heavily to Republicans. And no, the data does not support, in my opinion, that companies give to who's in power. Because I went back and looked at this, and looked at this all the way back to the 2004 presidential - and so, you can look back during the Obama years - companies were consistently giving to Republicans, even though they weren't in power. And now that Republicans have been in power, there are still the companies that are consistently giving mostly to Democrats. And so, you look at a company like Apple or Google. Those companies are consistently giving to Democrats, regardless of who is in power. And there are other companies on the other side.

Nate Geraci: Hal, we have just a few minutes left here. As I'm sure you're aware, it can be extremely difficult for new ETF launches to gain traction. A number of ETFs just don't end up making it at all. But your ETF is already north of $35 million in assets and as you mentioned, it just launched back in September. What do you attribute that success to?

Hal Lambert: Well, again, no one has ever done this before. And so this is the first ever truly political ETF. I'm calling this politically responsible investing. You've got socially responsible investing, this is politically responsible investing. And I really put this in the category of political beta, so kind of a smart beta play. But I think there's a lot of interest in this. There's been a lot of interest in this strategy and I think it's going to gain even more traction in 2018 because still many, many people have not heard of it and it's really just getting the word out. But I've talked to a number, a number of people out there, even my friends on the left, that really view this as a really interesting idea and a really interesting approach to investing. And so I think the product itself is good and I think that the idea behind it is good. And so I think with those two things, the traction is there and I think it'll continue to be there.

Nate Geraci: I know you can't talk specifics, but given the success that you've already seen from MAGA, any plans for additional politically themed ETFs?

Hal Lambert: Yes, there are. There are some additional ones that I'll be coming out with and I think there's a lot of room in this category. There's a lot of socially responsible investing funds. I think within the political realm, there's plenty of room both in the US and internationally.

Nate Geraci: Hal, with that, we'll have to leave it there. Really appreciate you joining us on the program today and congratulations on all the success with MAGA. Thank you.

Hal Lambert: Thank you very much, and people can follow me. I'm on Twitter @MAGAindex and they can also go to my website, investpolitically.com, to get any information including the prospectus and the fact sheet on the companies. So investpolitically.com.

Nate Geraci: That was Hal Lambert, Founder and CEO of Point Bridge Capital. The ETF is the Point Bridge GOP Stock Tracker ETF, again ticker symbol MAGA.