TMFE is a smart-beta vehicle tracking the Motley Fool Capital Efficiency 100 Index. The strategy is rather potent, as TMFE has outperformed IVV and QQQ since its inception in 2021. With 100 stocks in the portfolio, it has a robust quality and growth factor mix. However, QQQ and QGRW are better on a few fronts.
TMFE invests in highly capital-efficient, growth-oriented companies like Netflix, Microsoft, and Meta, which we view positively for their innovation and market leadership. Despite strong holdings, our valuation analysis shows TMFE's top stocks are likely overvalued, with significant P/E expansion in recent years. TMFE's performance edge over the S&P 500 is modest and doesn't justify its 0.50% expense ratio versus cheaper alternatives like VOO.