O’Shares Investment Advisors’ 13F Stock Holdings & Strategy

Published on October 29th, 2020 by Nikos Sismanis

Branded by Kevin O’Leary’s celebrity-like personality in the investment world, O’Shares Investment Advisors provides ETFs for long-term wealth management, featuring quality investments that concentrate on wealth preservation and income growth. Each rules-based O’Shares ETF reflects Mr. O’Leary’s investment values and philosophy, ensuring that its portfolio is comprised of equities highlighting robust profitability, resilient cash flows, and a strong balance sheet.

Investors following the company’s 13F filings over the past 1.5 years (from mid-February 2019 through mid-August 2020) would have generated annualized total returns of 5.36%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 10.45% over the same time period.

Note:  13F filing performance is different than fund performance. See how we calculate 13F filing performance here.

You can download an Excel spreadsheet with metrics that matter of O’Shares Investment Advisors’ current 13F equity holdings below:

 

Keep reading this article to learn more about O’Shares Investment Advisors.

Table Of Contents

O’Shares Investment Advisors’ Chairman, Mr. Kevin O’Leary

During the summer of 2015, Mr. O’Leary launched his first ETF through O’Shares Investments, a division of his investment fund, O’Leary Funds Management LP, where he personally serves as chairman. Mr. O’Leary’s goal for his ETFs is to embody his prudent, quality-oriented investment philosophy that he follows as an investor, into thematic funds that deliver stable returns with limited risk.

Image source

If you have ever watched ABC’s Shark Tank or CNBC, it’s quite likely that have seen Mr. O’Leary passionately advocating towards investing in businesses with strong cash flows and robust balance sheets. In the case of picking up individual stocks, he believes that long-term dividend-paying stocks with limited risks provide a superior investment case, as he tries to minimize the variance of his returns, avoiding any potential volatility and uncertainty whenever possible.

Due to the increasing popularity of “Mr. Wonderful,” as he likes to call himself, Mr. O’Leary has been a key influential figure in the investing community. Over the past years, he has been sharing his wisdom in anywhere from investments to…dating advice, through his characteristic, brutally honest manner. To reassure investors of his and his own and management team’s commitment to delivering high-quality returns, Mr. O’Leary has his personal and family’s funds invested in these very same ETFs, staying true to his investing philosophy materially.

O’Shares Investments’ ETFs & Top Holdings

O’Shares Investments offers four different rule-based ETFs based on both companies’ size and their geographical exposure. All four funds have the common theme of high quality, cash flow-rich companies, stewarding Mr. O’Leary’s investment style, as mentioned earlier.

The company’s F13 filing and total returns reflect these four funds collectively.

Source: Company’s 13f filing, Author

The four ETFs are the following:

O’Shares U.S. Quality Dividend ETF (OUSA)

Tracking its very own O’Shares U.S. Quality Dividend Index, the fund is focused on holdings publicly-traded, large-capitalization equities that display high-quality financials and, most importantly, paying dividends. It is the company’s largest fund holding around $546 million worth of assets.

The fund’s top holdings include:

Microsoft (MSFT): 

Occupying about 5% of its portfolio, Microsoft is the fund’s largest position. The company reflects both OUSA’s large-cap characteristics and Mr. O’Leary’s investment values. The company holds around $136 billion in cash, has a quick ratio of 2.5, and features a 10-year DPS CAGR of 13.7%, showcasing a clear example of the fund’s traits targeting healthy financials and rapid income growth. Similarly, found in the top holdings of various hedge funds we have covered over time, Microsoft is undoubtedly taking the tech sector by storm and is one of the safest stocks for investors looking to gain exposure in the sector.

Home Depot (HD):

Having consistently held its dividend steady or increased since 1987, the company clearly embodies Mr. O’Leary’s dividend-growth investing style. The company operates in a sector that enjoys stable revenues. Simultaneously, the pandemic has boosted its most recent quarterly sales to a record-high of $38 billion, powered by increased demand for home-improvement products amid the staying-at-home economy. Over the past four quarters, the company generated nearly $16 billion of free cash flow, suggesting high financial solvency and liability coverage, hence greatly fitting OUSA.

Johnson & Johnson (JNJ): 

Featuring a record of 58 years of consecutive annualized dividend growth, the healthcare behemoth ticks all the boxes Mr. O’Leary is known for looking, including recession-proof cash flows, low volatility returns, and a healthy combination of capital appreciation and income growth. Currently yielding around 2.78%, the stock offers one of the safest investment cases in the sector. Investors can comfortably allocate capital in the company and be sleeping well at night, facing little to no correlation to the underlying economic conditions.

The Procter & Gamble Company (PG)

Following the same set high-quality financials, recession-proof cash flows derived from necessity products, and an uninterrupted dividend growth record lasting 64 years, is consumer staples giant Procter & Gamble. As COVID-19 strengthened the demand for consumer packaged goods, including P&G’s everyday essentials, the company’s most recent results achieved a quarterly revenue record of $19.3 billion, a juicy $4.28 billion of which made it to the bottom line. While the company’s financials should continue performing greatly, current investors should be aware that shares are trading at a decade-low dividend yield near 2.2% and an all-time forward P/E ratio of 25, which could potentially limit the otherwise stable total returns.

Image Source: Fund’s Website

O’Shares Global Internet Giants ETF (OGIG)

The company’s internet-oriented ETF is its second-largest, holdings nearly $500 million of total net assets. The fund’s rule-based features include large-cap companies that generate the majority of their revenues through the internet and e-commerce while showcasing the quality financials Mr. Wonderful is looking for. The fund also features significant international diversification for those looking not to limit their exposure to American-only equities, including its top holdings, Alibaba & Tencent.

Source: Fund’s website

The fund’s top holdings include:

Alibaba (BABA) & Tencent (TCEHY)

Collectively occupying around 10% of the ETF’s holdings, the two Chinese behemoths are the nation’s largest technology companies, offering investors rapidly growing, high-margin financials and massive moats due to their humongous scale. Featuring a combined market cap of $1.15 trillion, Alibaba and Tencent are currently both enjoying an annualized revenue growth of around 30% as they transform China to the digital era.

Considering that sheer size of the Chinese population, this opens up an enormous playing field for the two companies to expand; combined with technology becoming increasingly more integrated and cheaper to access in the country, the two stocks present the most trustworthy opportunities to gain exposure to the Chinese tech market.

Amazon.com (AMZN)

Amazon has been a phenomenal holding during the pandemic. Its e-commerce sales have benefited from COVID-19’s shifting offline consumer spending towards online. Its AWS segment is growing on accommodating this increased online traffic, keeping many of the websites we visit daily running smoothly.

As a result, the company’s latest quarterly results display an all-time high top and bottom line of $89 billion and $5.24 billion, respectively. While shares remain relatively pricy, as they have always been, the company combines high growth and a consistent generation of free cash flow.

The e-commerce giant is currently one of Kevin O’Leary’s favorite stocks to be invested, due to the company’s growth trajectory and increasingly lower retail competition due to COVID-19.

O’Shares U.S. Small-Cap Quality Dividend ETF (OUSM)

Holding just over $100 million of net assets, OUSM is OUSA’s cousin, with the only difference being the focus shifting on small-cap companies. Similarly, the fund is looking for high quality, low volatility stocks which have to be paying a dividend. Another characteristic difference is its holdings’ distribution. While OUSA features a more concentrated portfolio of stocks, OUSM largest holding accounts for only 2.1%, resulting in a greatly diversified portfolio, likely to deal with the increased volatility of small-cap vs. large-cap equities.

No sector occupies more than 20% of its portfolio, while its top holdings include stable cash-cows like the Interpublic Group (IPG), Snap-On (SNA), A.O. Smith (AOS), Dolby Laboratories (DLB), and Centex (GNTX), whose earnings have been growing gradually with limited fluctuations.

O’Shares Europe Quality Dividend ETF (OEUR)

OUER offers Mr. Wonderful’s investment philosophy, as mentioned earlier, applied to the European market. The fund holds trustworthy industry behemoths with long track records of proven free cash flow generation and substantial dividend payouts such as Nestle, Roche, Novo Nordisk, and Unilever.

Investors looking to invest in the ETF directly should be warry of the low volume of its shares due to its relatively tiny size, numbering just around $20 million of net assets.

Final Thoughts

Kevin O’Leary’s personality and investing philosophy have captured the attention of investors through his growing televised appearances. He has constantly been sharing his love for low volatility, dividend-paying stocks. Through his funds, investors have the opportunity to actively witness his investing wisdom, by either investing directly or cherry-pick their most attractive holdings to buy individually. Considering that all four ETFs have quite high expense ratios at around 0.48%, more experienced investors may find the latter option more appealing.

It’s worth noting that by attempting to generate such low-volatility, low-risk returns, the funds’ aggregate performance over the past 1.5 years clearly shows underperformance in exchange for safety.