Key takeaways
HTA offers a covered call strategy with global tech equities for dividend-focused investors.
The ETF’s dividend yield stems from a significant return of capital, favorably affecting tax treatment.
Management fees are high, but performance has justified it.
3 stocks I like better than HTA.ETF Performance and Comparison
Outperformance of the NASDAQ
The strategy of HTA, known as the Harvest Tech Achievers Growth and Income ETF, is centered around a covered call approach. This method serves to provide investors with exposure to 20 global technology stocks. By employing a covered call ETF structure, the aim is to moderate the volatility of portfolio returns, particularly when compared to direct ownership of technology equities.
The Harvest Tech Achievers Growth and Income ETF, trading under the ticker HTA, has surprisingly outperformed the NASDAQ. Despite the general assumption that covered call ETFs underperform the broader markets, HTA has consistently provided strong returns.
The ETF has assets under management amounting to $567 million. As an actively managed fund, HTA does not track a specific index but is instead curated by fund managers aiming for outperformance and reduced volatiliy.
- Assets Under Management: $567 million
- Fund Inception: 2017
- Management Strategy: Actively managed, no specific index tracking
Though management fees are relatively high, ranging from 0.85% to 1.00%, the performance has justified the costs in terms of outperforming tech indices.
Dividend Yield Explanation
HTA has a significant distribution of 7.89%, with a unique structure encompassing a mix of return of capital and capital gains. The return of capital component reduces the average cost basis of the holding, which is tax-free at the time of receipt but may increase the capital gains tax later if the holding is sold at a gain.
It is no guarantee that HTA’s structure will be like this moving forward, but in 2023 this was the case.
HTA Valuation
HTA is marketed as having exposure to the global technology sector, which is currently rich in valuation due to the AI and crypto boom. This is reflected in the current weighted average PE ratio of 36x and a forecasted price-to-earnings (P/E) ratio of about 31x.
HTA Volatility
Focusing on risk metrics, the ETF records a beta of 1.05, showing that while it’s not immune to volatility, it holds up comparably to the market. During the turbulence of the tech market in 2022, the fund experienced a 38% drawdown, so it isn’t immune to large declines, lets make that clear.
