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CAPE, MOAT, and now DSTL: Where Lies the Value?

I have previously posted regarding my investments in the CAPE-Schiller strategy via CAPE or DSENX and in MOAT, the M* wide-moat strategy (also in OEF). Just recently I came across a Kiplinger article on the best ETFs for 2021 in which DSTL is given one of the spots at the head of the list. This ETF has been around only since 2018, a shorter time period than the other offerings herein, but the Distillate Capital (you can’t make these names up) fund, which falls into the Large Cap Blend category, has outperformed its older brethren. CAPE and MOAT, especially considering the latter’s new portfolio, have become value plays. Kiplinger is recommending the fund for the second time, I believe. DSTL appears at first glance to be a value fund of a somewhat novel application of the term.

The unusual thing about DSTL is the growth stocks it buys after applying its Free Cash Flow/Valuation metric. Their secret sauce is a cash flow based measure of value and quality. In the Fall, they sold AAPL after holding it for a long time. Alphabet is a current holding. The Distillate Capital website is a veritable library of white papers, very wonky, but not over my head. The October paper explains how their method led them to sell Apple. The US version of the strategy holds about $200M now and just a few days ago the international version (DSTX) opened for trading. From my observations, the MOAT international and global iterations did not add value, nor has the international flavor of CAPE.

I have the Distillate funds on my watch list. Lots of further reading on tap here:

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