SHEL
Shell plc
stockNYSEADR

# How This Active Value ETF Rode to the Top By [Lewis Braham](https://www.barrons.com/authors/lewis-braham?mod=article_byline) Follow Oct 07, 2026 2:00 am EDT Actively managed exchange-traded funds may not be that active after all. Many of the roughly 3,000 actively managed ETFs now trading are quantitatively run by computers that pick hundreds of stocks. That doesn’t sound very active—not in the traditional sense of money managers and teams of analysts doing deep fundamental research on individual companies. The PGIM Jennison Focused Value ETF, by contrast, is old school, holding just 35 well-researched stocks. “We do not drive the investment process by anything quantitative,” says Warren Koontz, head of Jennison Associates’ value group, which oversees about $11 billion, including this ETF. “We drive it by the underlying fundamentals of a company, and asking, ‘Are we buying that at a discount to what we think \[the company is\] worth?’ ” Twelve analysts and two co-managers—Joseph Esposito and Jason McManus—support Koontz on the $164 million ETF. Their deep analytical work has paid off. The ETF’s 25.7% three-year annualized return bests 98% of its peers in Morningstar’s large value fund category. The ETF is largely identical to the top-performing [PGIM Jennison Focused Value](https://www.barrons.com/market-data/funds/pjiax?mod=article_chiclet)  mutual fund, which Koontz and his team started running in December 2019 and which has $356 million in assets. Yet the ETF’s annual expense ratio is only 0.33% compared with the mutual fund’s 1.10%. That’s less than many quantitatively run ETFs charge. (The mutual fund is set to merge with the ETF in November.) Unlike quants, which screen for companies with low historical price/earnings or price/book value ratios, Koontz’s team tries to calculate the expected free cash flow of each company they analyze. “Free cash flow is a pure measure of a company’s ability to generate cash to reinvest into the business and/or give some type of return to shareholders in other ways,” he says. “Earnings are important, but also have a lot more accounting gimmicks or influences, so they become less relevant.” Yes, there are quant funds that screen for companies with high historical free cash flow. But modeling different scenarios where that cash flow is higher or lower than expected in the future and calculating an intrinsic value of the company from that analysis is an active manager’s game. Koontz is seeking unexpected or underappreciated catalysts for growth, not past cash flows like a quant. He wants that cash flow to be durable over the long term. The fund’s portfolio is an eclectic mix of growth-focused, asset-light tech stocks and cheaper, more traditional value plays, since Koontz’s team analyzes cash-flow models instead of assets on the balance sheets, [as more traditional value managers do](http://www.barrons.com/articles/value-funds-amazon-tech-stocks-adcfd689?mod=article_inline). Home builder [Toll Brothers](https://www.barrons.com/market-data/stocks/tol?mod=article_chiclet), insurer [MetLife](https://www.barrons.com/market-data/stocks/met?mod=article_chiclet), and [General Motors](https://www.barrons.com/market-data/stocks/gm?mod=article_chiclet) fall into the latter camp, with forward P/E ratios all below 11. “People might say, ‘Why do you own Toll Brothers when interest rates are so high and houses are hard to afford?’” Koontz says. Yet Toll’s underappreciated value is that it builds high-end homes whose wealthy buyers often purchase them either with cash or with large down payments, so mortgage rates are less important. The stock has “done relatively well in this environment, and it’s part of our diversification strategy to own it,” he says. Holding Toll with Microsoft, Apple, and Amazon.com, the fund’s three largest holdings, does indeed provide diversification in a concentrated portfolio. Yet Koontz would argue Microsoft is both a growth and a value stock after recent concerns about artificial-intelligence coding tools replacing traditional software caused a selloff, the so-called software apocalypse. He sees concerns about AI’s disruption of the software industry as temporary. “Software companies haven’t really been disintegrating from any type of sales standpoint,” Koontz says. Microsoft and others are developing their own AI coding agents specific to their businesses that may prove better than more generic ones. In addition, “Microsoft was early in AI development with their huge investment in ChatGPT,” he notes. The company has numerous ways to both defend itself and profit from AI. Apple is also catching up with its Siri AI and Apple Intelligence development, but perhaps more importantly, it’s allowing outside AI compatibility with its new iOS 27 operating system. “Apple was behind in AI and still is technically, but the average iPhone user doesn’t care whether it’s ChatGPT or Perplexity or Gemini they’re using,” Koontz says. “They just want the ability to use it.” Apple’s compatible AI offerings “puts it in a better place.” Combining such high-tech darlings with a company like GM, which was reviled [for going bankrupt](https://www.barrons.com/articles/SB124000819087830417?mod=article_inline) during the 2008-09 financial crisis, is part of the fund’s secret sauce, enabling it to do well in different market environments. Koontz often looks for talented new executives who are turning a once distressed business around, and with [Mary Barra](https://www.barrons.com/articles/gm-ceo-mary-barra-evs-cruise-china-88e0f834?mod=article_inline), who became GM’s CEO in 2014, he has found one. “Barra has done a wonderful job, and every time GM reports their \[earnings\] numbers, they’re better than people imagine,” he says. Even so, the company has a forward P/E of just 5, according to Morningstar. Though 21% of the fund is in tech stocks, 18% is in financial services, which also adds balance. Yet because the fund is concentrated, Koontz wants the highest-quality banks and insurers with manageable debt loads and skilled management teams to avoid the volatility caused by distressed balance sheets and poorly underwritten loans he witnessed firsthand in 2008. He likes [JPMorgan Chase](https://www.barrons.com/market-data/stocks/jpm?mod=article_chiclet) and [PNC Financial Services Group](https://www.barrons.com/market-data/stocks/pnc?mod=article_chiclet). “JPMorgan obviously has a huge number of different businesses, and certainly it’s one of the best-managed banks on the planet with \[CEO\] [Jamie Dimon](https://www.barrons.com/articles/jpmorgan-chase-jamie-dimon-plans-69881fc5?mod=article_inline),” he says. But PNC has a bigger active weight versus the fund’s benchmark, and “we think it’s more favorably positioned from a loan portfolio standpoint.” With the [bond yield curve steepening](https://www.wsj.com/livecoverage/stock-market-today-dow-sp-500-nasdaq-10-05-2026/card/latest-bond-selloff-marked-by-steepening-yield-curve-dBJlmhph1j36N5ufMHOz?mod=article_inline), traditional bank lenders like PNC stand to benefit from a widening spread between short- and long-term interest rates. Koontz’s portfolio might seem eclectic, with its high-tech and old industrial combos. But eclecticism is what you expect from a traditional active manager seeking value wherever he can find it. [https://www.barrons.com/articles/active-value-etf-620d4be0](https://www.barrons.com/articles/active-value-etf-620d4be0) # Top 10 Holdings ||**Company / Ticker**|**Portfolio Weighting**| |:-|:-|:-| ||**Microsoft / MSFT**|6.3%| ||**Apple / AAPL**|5.7| ||[**Amazon.com**](http://Amazon.com) **/ AMZN**|4.7| ||**JPMorgan Chase / JPM**|4.3| ||**ExxonMobil Holdings / XOM**|4.0| ||**Shell / SHEL**|3.6| ||**Walmart / WMT**|3.4| ||**Toll Brothers / TOL**|3.2| ||**Alphabet / GOOGL**|3.0| ||**Advanced Micro Devices / AMD**|3.0| ||**Total Weighting**|41.2%| Source: Morningstar

Occasionally you forget how ridiculous some of these valuations get. For example, TXN and SHEL have basically the same market cap, and yet: TXN Revenue: $19.5B, net income $6B SHEL Revenue: $296B, net income $26B. So 15x revenue, 4x the income And Im not even trying to compare the meme stocks like SPCX or TSLA, TXN is a relatively boring unhyped stock, but has crazy valuation because of course, semiconductors.