The Science of BOBP: Where Quantitative Data Drives Insight

In a market crowded with stock-picking strategies and factor-driven indexes, identifying truly optimal securities requires more than chasing the latest headlines or reacting to short-term swings.

 

The CORE16 Best of Breed Premier Index ETF (BOBP) tracks the proprietary Core16 Best of Breed Premier Index, which is built on a model designed to potentially anticipate trends through a blend of momentum analytics, earnings stability measures, capital-efficiency screens, valuation discipline, and a proprietary market signal known as the Gainers-to-Losers Indicator. The result: a rules-based approach seeking to identify large-cap companies with the potential for near- to medium-term appreciation while attempting to manage downside risk along the way.

Start With Quality: The Best-of-Breed Universe

The index construction begins with a clearly defined pool: U.S.-listed large-cap stocks with at least $5 billion in market cap. This ensures liquidity, durability, and operational scale, creating a foundation before any factor work begins.

From there, the index’s proprietary algorithm gets to work. The model evaluates every company across multiple layers of data designed to surface names with potential strength and resilience.

The Factors That Matter

BOBP’s index doesn’t rely on one magic metric. Instead, it blends a combination of fundamental and quantitative factors that advisors care about:

Momentum That Looks Forward, Not Backward

Rather than chase short-term pops, the model evaluates trend persistence and directional strength to identify potential companies showing sustainable leadership.

Earnings Stability and Quality

Companies with consistent, high-quality earnings often weather volatility better and may be better positioned to sustain longer-term growth.

Capital Efficiency

Smart allocation of capital remains a core signal of operational excellence. Core16’s model seeks to reward companies that generate and deploy capital effectively.

Valuation Discipline

Momentum without valuation guardrails often leads to trouble. The model incorporates valuation measures to help avoid names that look strong on the surface but are priced beyond reason.

Positive Return Asymmetry

By favoring companies with positive skewness*, those showing a historical tilt toward upside over downside, the strategy seeks to avoid candidates with a potential disproportionate drawdown** risk.

All of this rolls up into a scoring system that ranks every stock objectively, not emotionally.

The Gainers-to-Losers Indicator

The star of the engine is the index’s proprietary Gainers-to-Losers Indicator, a quantitative gauge of market tone.

Rather than letting mega-caps dictate the narrative, this indicator looks across the entire large-cap universe and tracks how many stocks are gaining versus losing over the past 12 months. It seeks to be a broad market “heartbeat” that highlights whether leadership is expanding or contracting.

When gainers dominate, the model tilts toward strength. When losers outweigh gainers, it becomes more selective. It’s systematic, unemotional, and designed to help avoid pockets of potential weakness.

Turning Insight into Portfolio Construction

The top 50 ranked names become the index’s selected constituents. Bi-weekly rebalancing keeps the portfolio aligned with shifting market dynamics, while a rules-based cash overlay helps the index attempt to mitigate drawdowns during periods of elevated risk.

For advisors, this means a large-cap equity strategy that aims to stay ahead of market shifts without complexity, guesswork, or discretionary intervention.

 

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To see the “Best of Breed” holdings here. Holding subject to change.

 

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*Skewness refers to the asymmetry or lack or symmetry in the distribution of returns or prices of financial assets. Skewness helps to understand whether the returns on an investment are more likely to be concentrated towards positive or negative values.

**Drawdown: the investment loss experienced from a high point to a low point.