Why Is Everyone Comparing $GRNY to $SCHG? Which Is Better?

While Stephen Curry (91.1%) and Steve Nash (90.4%) are synonymous with lifetime NBA free-throw marksmanship, 70s Hall of Famer Rick Barry stands apart – not only because he also played in the ABA and pioneered the concept of the point forward position, but because he notched a lifetime free throw percentage of 89.9% using the underhanded “granny shot” – ridiculed despite its effectiveness most recently displayed in the Netflix sports sitcom Running Point, starring Kate Hudson.

Launched in November 2024, the Fundstrat Granny Shots US Large Cap ETF (NYSEARCA: GRNY) was analogously named for its unconventional, yet effective approach towards portfolio management. Similarly to Rick Barry, who answered his critics with a lifetime 25.8 ppg scoring average throughout his career, GRNY has responded with +18% return gain year to date, nearly double that of the S&P 500, at 10.5%.

The brainchild of Wall Street equities analyst Tom Lee, the launch of GRNY validates and crystalizes many of Lee’s conclusions and theories about the equities market culled from his 25+ years on Wall Street. 

A Trailblazing History

The son of Korean immigrants, Tom Lee’s psychiatrist father and entrepreneur mother may have influenced his future career as an equities analyst-turned ETF issuer. Logging stints at Kidder, Peabody, Solomon Smith Barney and JP Morgan Chase as a Chief Equities Strategist throughout the 1990s, Lee first appeared on the national radar over controversies stemming from his negative analysis report on Nextel. The company vehemently took to the press to rebuff  Lee’s uncomfortable questions concerning misleading metrics, accounting “tricks” making transparency more opaque, and inaccurate debt expenses. Lee was ultimately proven correct; the eventual Nextel merger with Sprint became infamous as one of the most disastrous in telecom history. 

Leaving JP Morgan in 2014 to start Fundstrat Capital, Lee’s profile began to grow as he made himself available to many news and streaming outlets, eager for his take on the markets, especially after he became the first Wall Street analyst to publicly go on record in analyzing Bitcoin (BTC) in 2017. At the time, Bitcoin had hit $2,450. Lee projected a 5-year price target of $55,000. 

Lee’s comfort with discussing equities and cryptocurrencies with equal aplomb has built a following through his frequent appearances on CNBC and online. His decision to go from the analyst side of the industry to launch an ETF was eagerly awaited, akin to Joss Whedon’s transition from Buffy The Vampire Slayer and Firefly screenwriter to directing the box-office blockbuster The Avengers (2012). 

Granny Shots Explored

Rather than attempting to replicate and track an index with a couple of tweaks, GRNY rethinks the ETF approach in several ways:

• Comparable to the underhanded Granny Shot free throw, GRNY stock selection qualification requires the stock to fall under a number of off-the-wall and unconventional  investment themes that Fundstrat has identified as growth drivers.
• There are three short term (6-12 month) themes: Style Tilt, Seasonality, and PMI Recovery.
• The four long term (3-5 year) themes are: Energy/Cybersecurity, Millennials Impact, Global Labor Suppliers (an AI parameter), and Easing Financial Conditions.
• The multiple themes concept is designed to choose sufficiently diverse growth stocks that will supply a portfolio with resilience against a range of potentially adverse news events.
• Qualifying stocks must align with at least two (2) themes identified in the investment themes to warrant portfolio inclusion. 
• Qualifying in more than two themes does not necessarily lead to greater portfolio weighting for any particular stock, as additional criteria is used for that determination.  
• The portfolio is limited to roughly 35-40 S&P 500 stocks that meet the Fundstrat multiple investment theme parameters. It is rebalanced every quarter.

The top 10 largest holdings in GRNY at the time of this writing are:

• Palo Alto Networks: 2.76% (4 themes)
• Caterpillar: 2.68% (2 themes) 
• American Express: 2.68% (2 themes)
• Expedia Group: 2.66% (2 themes)
• Wills Towers Watson PLC: 2.65% (2 themes)
• Live Nation Entertainment: 2.64% (2 themes)
• Axon Enterprise: 2.63% (2 themes)
• Tesla, Inc.: 2.62% (2 themes)
• Alphanet Inc. Class A (Google): 2.62% (4 themes)
• JP Morgan Chase: 2.60% (2 themes)

How The New Kid On the Block Compares

To see how GRNY compares to its peers, the Schwab US Large-Cap Growth ETF (NYSE: SCHG), which tracks the Dow Jones US Large-Cap Growth Total Stock Market Index, might be an apt benchmark. As GRNY has only been in existence for 9 months thus far, below are how the two ETFs appear next to each other on common criteria as of the time of this writing:

Category	SCHG	GRNY
YTD Return:	10.23%	18.00%
Number of Holdings:	230	35
Total Assets:	$46.36 billion	$2.395 billion
Expense Ratio:	0.04%	0.75%
Daily Average Volume:	8.81 million shares	2.974 million shares
Price:	$30.87	$23.69
NAV:	$30.66	$23.46

Top 10 largest holdings:

• Nvidia: 12.56%
• Microsoft: 10.96%
• Apple: 8.97%
• Amazon: 6.25%
• Broadcom: 4.74%
• Meta Platforms (Facebook): 4.34%
• Alphabet Class A (Google): 3.28%
• Tesla: 2.98%
• Google: 2.66%
• Visa: 2.0%

Clearly, the Year to Date return differential is startling: GRNY’s 18% vs. SCHG at 10.23%, roughly on par with the S&P 500 Index. Another surprising difference is that although the GRNY portfolio contains all of the stocks in SCHG’s top 10 except for Visa, the only ones common to GRNY’s top 10 are the weaker of the Magnificent 7 stocks at this time: Alphabet/Google and Tesla. 

Explanations From the Source

Unsurprisingly, Tom Lee has commented multiple times about GRNY, explaining some aspects to his approach and the rationales behind his decisions. Some quotes from his appearances on CNBC include:

“It’s definitely been a positive surprise because we know how crowded the space is. … This product really seems to be connecting with people, and from the comments we’ve received … people have been buying it regularly, so they’re not doing it as a one-time speculative purchase.”

“A stock that’s both an AI story and tied to millennials then has a better chance of outperforming, because at any moment AI may not be in favor, but millennials might, so you’re improving your chances of continuous outperformance.”

“I think the idea of using a thematic approach and thinking about the story arcs that last a long time to find the stocks [that] outperform, I think that’s what [has] really resonated with us. I think that is how you can still outperform.”

In its first 9 months, Fundstrat has seen inflows of over $2 billion into GRNY, a phenomenal sum for a new issue ETF in such a short time. At the time of this writing, Tom Lee has proceeded to register a covered call ETF to compete with former employer JP Morgan Chase’s  JP Morgan Equity Premium ETF (NYSEARCA: JEPI) and a small cap ETF. If the success of GRNY is any indication, these ETFs will also offer an innovative insight into the markets and the Fundstrat criteria for analysis, which is becoming a new paradigm. 

 

 

 

The post Why Is Everyone Comparing $GRNY to $SCHG? Which Is Better? appeared first on 24/7 Wall St..