Portfolio Spotlight Series 1 – CXSE

On By piranhaprophetIn My Portfolio

Update as of September 2021

I have bought into CXSE again as of September 2021. However i have kept it within 5% weightage of my portfolio.

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Update as of August 2021

i have sold off all my CXSE shares due to regulatory risks from the Chinese government. When the regulatory cleansing officially ends. i will relook at this ETF.

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In the Portfolio Spotlight Series – i will be going through each holding in my portfolio and the selection criteria for its entry. Stocks are either
1. Great companies with consistent earnings, free cash flow, strong competitive moats. These are first team players
2. Potential growth companies with breakout earnings, growing competitive moats etc… these are hot youth prospects
3. Geographical / sector diversifications.. these are meant for diversification purpose and are reserves

Asset CategorySymbolQuantity
StocksAMD300
StocksCXSE200
StocksMSFT500
StocksPLTR4000
StocksTSM200

The fourth in the Portfolio Spotlight series is CXSE. CXSE stands for WISDOMTREE CHINA EX-STATE-OWNED ENTERPRISES FUND. This ETF is mainly for diversification purpose mid to long term. It serves to protect against rotational play (e.g. sector rotation) as well as geographical diversification. CXSE currently holds the position of reserve in my team. ETFs are measured using different set of metrics from Equities.

1)Liquidity

According to ETF.com, CXSE has a liquidity rating of 5 – the highest rating.
It’s average spread % is only 0.11 ($0.07). Liquidity defines the bid ask spread of a fund. The higher the liquidity , the smaller the bid ask spread, hence higher opportunity for profit.

https://www.investopedia.com/articles/exchangetradedfunds/08/etf-liquidity.asp

2)Tracking Error

Tracking error is the divergence between the price behavior of a position and the price behavior of a benchmark. The lower the tracking error % , the lesser the divergence. The downside standard deviation of CXSE is 0%!

3)Market Cap Size

CXSE’s holdings consists of a whopping 89.31% stocks which are large market cap and 10.19% which are mid cap. There are no small and micro cap stocks. This buffers the ETF from shocks due to unpredictable events such as company bankruptcies or accounting fraud which is more likely to happen to small cap companies.

4) Expense Ratio

The expense ratio refers to how much of a fund’s assets are used towards administrative and other operating expenses. Because an expense ratio reduces a fund’s assets it reduces the returns investors receive. As a rule of thumb, expense ratio of large cap ETFs should not exceed 1%. The expense ratio of CXSE IS 0.32%!

5)Diversification

CXSE has a total of 163 holdings in 50% tech and 50% non-tech. Most importantly it excludes State-Owned Enterprises !
CXSE is mostly vested in Asia-Pacific geographically and spread across China and Hong Kong. This makes for a great geographical diversification tool against US equity holdings.

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