ETF Battles: IDVO vs. LVHI vs. SCHY - An International Affair!

Well, if your portfolio only speaks English, it's missing the global conversation.

Mindes amigos.

From emerging markets to established powerhouse economies, international stocks offer diversification and serious growth potential.

Today's audience requested ETF matchup is a triple header.

It's a duel between international ETFs from Amplify, Franklin Templeton, and Charles Schwab.

I should say dividend international ETFs.

Stick around to find out which one might be the best choice.

This is ETF Battles and I'm Ronda Ley and a warm welcome to all.

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So, today's ETF battle was suggested to us by a viewer named Brian.

And Brian wanted us to look at uh what he called promising international ETFs for diversification.

Thank you, Brian.

This is an excellent matchup request.

And it's a triple header between International Focused Funds from Amplify, Franklin Templeton, and Charles Schwab.

Judging today's contest, we have got the best in the business, Mike Akens at ETF Action, and David Durkin, an independent ETF analyst.

Great to see both of you guys and welcome back. >> Thanks, Ron.

It's great to be here. >> Yeah, thanks.

Good to see you again.

Our four battle categories are cost, exposure, strategy, performance, and then we've got our mystery category where our judges can pick a factor or thing that they feel is crucial to today's contest.

Our judges can also nominate wildcard ETFs.

We may get a few of those on today's program.

So, we we'll just have to wait and see.

Uh I got the scorekeeping duties at the end of the program.

We will declare an overall winner.

And remember that none of the battle outcomes are ever predetermined or known in advance by our judges or myself.

So the first category is cost.

We're going to start with you Dave.

Get get us started. >> Yeah, th this category is pretty clearcut.

Uh SCY comes in at eight basis points.

U you know a lot of the Schwab ETFs are are cost leaders in in all the categories they're in.

Uh and this is no exception.

LVHI is at 40 basis points.

IDVO is at 66 basis points.

Uh, SE is the clear winner here. >> Mike, you're up next.

How do you see it in terms of cost?

I >> mean, Schwab is like the little sister Vanguard when it comes to competing on fees.

So, it's pretty obvious.

I would also note that both SCHY and LVHI have a liquidity advantage um over IDVO.

But, as we will explore as we go along in the debate, sometimes there's more to be known than just cost itself.

That takes us next to exposure strategy.

And Mike, you're still up.

So, what do these funds do and how do they compare? >> All right.

So, let's We really have a good matchup here today.

We have three very unique strategies.

Um, very different.

They're going to get you exposure to that international marketplace.

They're going to do it in very unique ways, right?

First, I would call this a dividend matchup.

Um you have two traditional divid strategies dividend strategies that are focused on dividend paying companies that being SCHY LVHI and then you have a non-traditional um strategy that's going to create income through writing covered calls and it's actively managed.

So let's start there.

I would think call this kind of that non-traditional actively managed um income generator for international stocks.

First on the actively managed side they are very active.

If you look over history, um the team that um is managing this portfolio for Amplify is really making bets and making changes over time, right?

You know, look back a few years ago, energy was the largest allocation in the portfolio.

Today, it's much smaller, you know, with much larger allocations to information technology, much more growth tilt to the portfolio.

So, they're actively picking the stocks that they believe are going to outperform in the current environment.

Um, but it's also important to note that they're doing it, they're limiting themselves to doing it with ADRs.

So, they're getting that exposure by only investing in USlisted ADRs.

So, full exposure to the local company, but they're doing it through an ADR.

Um, so it's a um, as you'll see when we talk about it, it's going to have it's got a more of a growth tilt right now.

That's not historically true, but it does right now within the portfolio.

And then you kind of switch over to SCHY um, and LVHI.

I would call CHI a core dividend portfolio, right?

It's very diversified.

It's 100 stocks.

They're looking for dividend payers, but also applying a lot of stringent quality screens.

So, kind of a fundamentally developed portfolio.

It's going to have a value tilt just like LVHI.

It will consistently have that value tilt, but you know, it's going to get you a good broad-based diversification, lowcost exposure to the marketplace.

And then there's LVHI.

I would call it your defensive dividend income.

Right now, it's going to take that dividend approach, but then it's also going to overlay um the concept of low volatility, right?

Low volatility dividend payers and and in doing so, it creates a much different profile than the other two portfolios.

Um it gets a much higher allocation to defensive sectors like utilities, which have historically lower volatility.

Um, so you know, your up- down captures on an LVHI are going to be much lower um because you're going to have a much more defensive portfolio.

So very unique strategies.

Where does that bring me?

Um there I would say you really they're all three very good um fundamentally built portfolios.

I tend to like the ability with international investing to be able to change with the environment.

If you kind of look at IDVO, that active management, you can see where they've changed exposures from Europe to Asia back to Europe, where they've changed from energy to information technology and back around.

I do think there's an opportunity set there.

Um, they're going to capture that income for you.

So, you know, you have to note that they're going to put a little cap on their upside of their stock calling by riding those covered calls.

Um, but um, as we'll get into in the next section, they've done extremely well.

Um, so that's my winner for this category, but that's my personal preference.

It really depends on what you're trying to build.

I think you can't go wrong with any of these strategies.

They're all um unique in their own aspect, which makes this battle very fun. >> Dave, you're up next.

How do you see it when it comes to exposure strategy?

Yeah, I I agree with Mike's take on this and that each of these funds really has a fairly robust uh multiffactor strategy that, you know, takes a look at yield, it takes a look at dividend history, it takes a look at quality.

So, you're really getting a a pretty well-developed, well-rounded, high quality portfolio that's that's really ideal if you're going to invest in international stocks for dividend income.

Um Mike kind kind of ran down the whole strategy with IDVO.

You know, even even that one looks at, you know, dividend growth and earnings growth.

You don't see that in a in a lot of covered call strategies.

A lot of them will just overwrite an index and and call it a day.

But like Mike said, this one's actively managed, has some screens in there.

It's trying to be very opportunistic.

So, in that sense, I I think IDVO is really good uh among covered call strategies.

I tend to kind of take the opposite stance.

I like the more traditional dividend equity uh products.

And between SCHY and LVHI, I I think it's really close.

I'd probably give just the slightest of advantages to SCHY here. um you know both of these both of these funds look at sustainable earnings and uh cash flows and debt levels and roe and it gives some consideration to high yield and you know SCHY even has a uh a low volatility tilt to it even though it's not uh specifically you know explicitly stated like LVHI is.

So uh I think they're both very good strategies.

Uh, I kind of prefer SEY just a little bit because it takes in uh takes into account that dividend growth history and dividend growth rate a little more than LVHI does.

I think it just makes a little more well-rounded.

So, uh, again, I agree all these funds are are great at what they do.

I'm just going to give the slight advantage to SCHY in my opinion. >> Very good.

Now, that shifts us to the next category which is performance and yield.

And uh both of those things have been combined into one category.

So Dave, break it down for us.

How do these funds compare? >> Yeah, Mike kind of alluded to it already, but IDVO is is the winner in this category.

It's uh over the short and uh since the since inception or since common inception, I should say, IDVO has outperformed both LVHI and SCHY by uh modest but meaningful margins, I'll call them.

And uh because IDVO uses a covered call strategy, um not surprising, it's got the higher yield as well.

It's at around 6%.

LVHI and SE are both at just a hair over 4%.

So there's a meaningful yield advantage.

Obviously, the strategies are different, but um if we're just looking at the numbers here, both performance and yield, IDVO, uh IDVO is the winner. >> Mike, you're up next.

How do you see it when it comes to performance and yield? >> Yeah, I mean IDVO has had a really good run, right?

It's historical returns are not, you know, indicative of future results.

All that good disclosures, but you got to hand it dip your hat in terms of how they've performed.

Um, in their history here over the last three years, they've really, you know, done quite well relative to the other two, but more importantly, relative to the benchmark.

Um, they've done that through some pretty aggressive tilts.

So, that introduces tracking error in that concept.

Um you know one thing I would note that I should have noted in exposure strategy is LBHI does um hedge out currency risk.

So um that was a benefit to it you know in years past as the dollar was stronger than a lot of your foreign currencies but this year it's been a hindrance to performance that is a big deal international investing um you know if you're going to hedge out currency risk um it can be a big driver of your overall return perspect perspective um I tend to think that if you're investing international part of the diversification is getting exposure to those currencies so I just wanted to throw that in there um it does show up in that return profile that that currency hedge hedging out the currency of the um of the portfolio.

But I think just you know on a look backward basis it's pretty obvious IDO is the winner right now.

On a look forward basis I I do think they've they've demonstrated the ability to navigate the markets.

Um they've got a little bit more of a growth tilt. uh long-term earnings of the underlying companies currently held in that portfolio is 3x that of LVHI and um Y.

So it's got that more growth tilt which I think kind of fits the dynamics of today's markets.

Um so just in general I I like that um performance risk and then yield.

Um yeah, I mean they're going to get you more income.

It's going to be a little bit tax different because they're generating off option incomes.

Um, the other two are going to get you a nice solid 4% uh, you know, qualified dividend income.

So, you really can't go wrong there either.

But just IDVO is my winner kind of across the board here. >> Got it.

And G getting to back to your point on currency diversification because I thought that was a great a great point on LV uh, HI.

And I think it's worth reiterating because when you invest in typically an international equity fund, you're getting not just equity diversification, you're also getting currency diversification.

But in this case, as you had mentioned, LVHI is hedging the currency.

So that that basically takes away the currency diversification.

Is that right? >> Correct.

Yep.

So you're you're getting access to the true performance of the underlying company.

Um without that, you know, like this year, international companies are doing really well, right?

You're actually getting paid to diversify.

It's a it's a headline story, if you will.

But also part of that outperformance is the fact that the dollar is very weak this year.

So you're getting a double hit.

Those currency hedge products that have been really popular in the past and have outperformed are trailing their non-hedge versions this year.

So, it's just something to always keep an eye on. >> 100%.

Thank you for bringing that out.

So, that takes us next to the mystery battle category.

This is where our judges could pick a certain factor or thing that they feel is important to today's contest.

And Mike, you're up.

So, what is your mystery category and which of these ETFs wins it?

Yeah.

So, I think this is kind of a fun one.

I an actually an opportunity to go under the hood and look at the fundamental kind of DNA of the portfolios um and and break these down.

I think you know right now if you look at IDVO it's set up with a growth tilt.

Um it's got a higher growth um rating using our um look through statistics than it than the benchmark than both of the LVHY and SCY.

Um but then you know if you look at the SCHY it says it's going to use quality as a screen as part of that overall process.

It has the highest ROE of the three right which is a very good determination of quality uh of your portfolio.

And then then that kind of that value tilt that I mentioned in LVHI.

LVHI has a much lower forward price earnings ratio than the other two.

So um I think that mystery category is understanding that you know these portfolios they may track the broad same areas of the market but you got to go under the hood to understand what you're getting into.

Um with so many available options um you know there's not that much overlap in these strategies. um despite kind of all being categorized in the same area of the market.

Um and to that extent I really wanted to profile you know that unique I think right now IDVO this could change it's an actively managed portfolio but right now it's set up with that growth tilt you know uh Schwab a lot of Schwab's um fundamental portfolios especially their dividend portfolios incorporate a quality tilt you can see that in the numbers with roe you can see that with long-term debt to equity ratios and then um you have kind of that valuation angle um that deeper value um profile of LVHI.

That brings me to my winner based on my pure personal macro assumptions right now.

Um I think growth is a little overdone in the US, but it's not internationally and I kind of like that growth tilt.

Um getting to some of those areas of the market that you know if a market cap weighted index internationally does not look like a US market cap weighted index.

So putting a growth tilt on gets you into some more of those growthy sectors like technology discretionary.

Um, and I like that right now.

So, that's my mystery winner.

But I think broader point of mystery category is just how different these portfolios look fundamentally on valuation metrics, on growth metrics when you go under the hood. >> So, which of these ETFs is your choice?

The mystery category? >> IDVO. >> Okay, perfect.

I got you down for IDVO.

You're up next, Dave.

What is your mystery battle category?

Which of these ETFs stands out?

Well, my category is actually going to be pretty simple.

Um, I'm just going to look at dividend frequency and consistency.

And that uh basically alludes to the the distribution schedule of each of these funds.

And I I would think while you don't necessarily need to, you know, live off your portfolio income if you if you own one of these funds, I think a lot of people are relying on their portfolio to uh deliver them predictable and consistent income.

And uh if you look at a lot of the international equity funds that that deliver dividends, most of them do it on a quarterly basis and a lot of these quarter-over-quarter distributions are really choppy and inconsistent.

So, uh you may have a huge distribution one quarter, very slight the next quarter.

There's just no uh there there's really not a lot of predictability to it.

Uh, IDVO on the other hand, obviously it's a covered call strategy, so it works differently, but uh, it delivers its distributions on a monthly basis.

If you look historically at those distributions, uh, they've been very steady.

They've actually been increasing over time.

So shareholders have, uh, gotten a nice pay raise over the last several years.

So I think for for people who are relying on their portfolios for income, that's an important factor to consider.

So just from a standpoint of income predictability uh and steadiness for uh for income seekers, I think IDVO is the winner here. >> All right.

Well, we've moved to the part of the program where our judges are going to give us their overall battle winner.

And so far, according to my scorecard, this has kind of been all over the place with our judges agreeing on some points, disagreeing on others.

And uh we're going to give you Dave your chance to weigh in with your overall winner.

Which of these ETFs stands out? >> Well, I'll start by saying that I think all three of these funds are are really good at what they're doing and what they're trying to accomplish.

I think they uh they all have solid yields.

They have solid strategies.

They have thoughtful strategies.

You know, in the case of IDVO, it's actively managed.

It's it's really trying to create alpha with its uh with its management style.

You know, we we talked right up top about the 66% expense ratio, and that seems high in isolation, but you know, sometimes you you need to pay up for a strategy like what IDVO is doing, especially one that's uh really active in its management.

So, there is some justification for the higher cost there.

But, uh my personal preference is just more of the traditional dividend equity.

So, uh I'm going to go with CHY as my winner.

And I I I think you really again, you can't really go wrong with either of these depending on what you're looking for.

But um if you're a fan of SCD, and I know a lot of people are, this is essentially the international uh brother of that fund.

So, you know, it looks at quality, it looks at yield, looks at dividend growth.

It uh it really has that nice multiffactor approach that really tries to identify the best of the best.

And uh for my uh my preference personally, even though it's underperformed uh recently, I think SCHY is going to be my winner. >> Yeah.

Okay, I got you down.

And then just back to your earlier point about dividend distribution frequency.

Sey I know IDVO is monthly.

Is CHY I I haven't looked at that.

Is it quarterly or monthly? >> Yeah.

Yeah.

Sey and LVHI are both quarterly dividend payers.

IDVO is monthly.

Yeah. >> Okay, perfect.

Mike, your final chance to weigh in with your overall winner.

Give it to us. >> Yeah.

So, my overall winner based on personal preference and where I think the market is is IDVO.

But I think Dave makes a really good point.

I'll I'll lay this out uh really succinct for you.

If you're looking for core access, you know, more of a beta play with a dividend tilt to international markets, go SCHY.

That can be a core stabilizer, above average income allocation to the international markets.

If your primary objective is income and capital preservation, i.e. you don't want as big a draw downs, LVHI has proven um in the biggest draw downs to done its downside capture is much lower than the other two um and it's delivered a similar income.

So by nature, if you're a bull and you believe over time markets going to go up, it's not going to keep up, right?

It's that low volatility option.

But if that preservation of capital, smaller draw downs is important to you, LVI is a great option.

And then finally, if you believe in active management in the international space, if you are comfortable with strategically writing covered calls, that's important note here with IDBO.

Unlike a lot of non-traditional synthetic income strategies that are their primary goal is to juice up income to 10 15% through covered calls and give up a lot of upside because when those get called away they lose that upside.

IDVO is more of a you know international investing first with strategically placing those covered calls to get you that steady income.

Um and I like that active management.

Um honestly I'd kind of just like to have it without the covered call strategy.

Um, that's my personal preference, but I like I like to style that strategy.

So, that's my overall winner.

But really, like always with it comes to these ETFs, it's the tool.

Um, you're the one using the tool.

So, I think it really comes down to investor preference and investor needs, uh, risk assumptions and all that good stuff.

Well, our judges have spoken and man did we have some awesome analysis today.

And according to my ballot scorecard, this is going to be a split decision between IDVO, that was Mike's choice, and SEY, which was Dave's choice.

And as our judges both mentioned, all of these ETFs in today's contest are excellent international funds at what they do.

And it really depends on you and how you're using these particular ETFs, what exactly that application is, what that primary prioritization is.

For example, as Mike mentioned, LVHI, even though it didn't get uh any win here or votes, uh it it is more defensive in nature.

So, if you're looking for more of a defensive way to play international uh equities, that would be a clear choice.

IDVO uh it was Mike's choice.

He likes that active management.

It's not just doing covered calls on a generic index and uh it has delivered very strong performance with a a compelling yield.

So that again was Mike's choice.

And then Dave mentioning SCY which uh also is a very strong fund in its in this category and uh he's a purista when it comes to dividends.

Uh so you know and that's his wheelhouse too by the way.

Dave Dave when it comes to to dividends, I mean that's what he knows and understands and so uh that's we're definitely going to take his uh his decision on SCY seriously as always.

Uh but SCHY was his choice.

Great job to both of our judges on the analysis.

Uh very thorough.

Also, I wanted to mention Mike.

Um, Mike, you just re, well, I shouldn't say relaunched, but upgraded ETF action and uh, you've got a lot of new content there and you're also posting some additional research that is linked to this uh, particular area or space of the ETF market.

So, tell us more real quick before we cut out. >> Yeah, thanks Ron.

We we just launched our content site.

So, ETF action at its core is a data analytics platform.

Um you know our user base is um sophisticated institutional um financial advisor base users of our platform um doing it kind of on their own taking our data and tools to kind of create their story.

We wanted to create u more commentary around that.

So we built a new content site where we're providing highlevel datadriven insights on a daily weekly monthly basis what's going on in the ETF market which then leads you into how to use our data and tool sets. um been really wellreceived and would love for people to check it out at ETFAction.com.

It's it's a great way to really stay informed of what's happening in the ETF markets. >> Yeah, for sure.

And you got factor flavors, which which I absolutely love.

Uh reminds me of like being in an ice cream shop, like, you know, pick your favorite flavor.

So, uh >> I'm gonna do a factor flavor on on this international piece and I'll I'll do it in this format.

Uh I'll share it with you guys when it's done. >> Yeah, for sure.

And we've got a link, by the way, to that in the description section below.

So, be sure to check that out at ETF Action.

Again, great job to both of our judges, Dave and Mike.

Thank you both for being on today's program. >> Thanks, R. >> Thanks, guys.

Good to see you. >> So, send us your ETF battle requests again in the comment section below.

Give us your ETF ticker symbols.

We could do double, triple, and quadruple headers.

Uh so, give us uh give us a good contest. and uh we'll take a look at it.

Also, be sure to visit direction.com.

That's uh our program sponsors uh website with lots of good resources for traders leveraged long leverage short choices in the ETF marketplace.

Lots of uh good choices at direction.com.

I'm Ronda Ley.

Thanks for watching ETF Battles.

We'll see you on the next episode.