Sam Klar, Portfolio Manager at GMO with nearly 20 years at the firm, joins Brad Roth to unpack the thesis behind the GMO Domestic Resilience ETF (DRES). From joining GMO directly out of undergrad to building a strategy around America's reindustrialization, Sam walks through how conviction and the quality-value framework define everything GMO does — and why the domestic resilience opportunity is far more bipartisan than most investors expect.
About Sam Klar and GMO
Sam Klar joined GMO straight out of undergraduate — which he describes as rare — working his way through global equity and event-driven merger arbitrage strategies over nearly two decades. GMO, founded in 1977 and managing roughly $70 billion in assets, has built its reputation on quality and value. But Sam points to a third element that cuts across everything: conviction. The willingness to look different from the crowd, even when it's uncomfortable, is what he credits with GMO's ability to find and hold real opportunities.
DRES launched in October 2025 and represents GMO's move into the ETF wrapper — a vehicle Sam describes as democratizing institutional investing, opening strategies that once required $10 million minimums to retail investors, advisors, and friends and family investing alongside institutional clients.
Investment Strategy and Approach
The core problem DRES solves starts with a number most investors don't know: less than 60% of the revenue generated by S&P 500 companies actually comes from the United States. For all the talk of U.S. equity allocation, a typical core holding is quietly very multinational. DRES flips that ratio — about 90% of portfolio company revenue comes from the U.S. market.
The strategy grew out of a multi-year research project focused on deglobalization and the shift toward a more multipolar world. What Sam and his team got excited about was the investment opportunity embedded in the U.S. response: reindustrialization, reshoring, and the broader concept of national economic resilience. To build the portfolio, GMO starts with roughly 200 companies that are — in Sam's framing — long the call option on U.S. reindustrialization. These fall into four proprietary buckets: manufacturing and automation, transportation and logistics, energy and materials, and defense. Traditional sector classifications didn't capture the opportunity well enough, so they built their own. A quality and value filter then narrows the portfolio to a concentrated 35 to 40 holdings.
Deeper Dive: Insights from the Full Conversation
Quality and Value in Practice
Sam gives concrete examples of how the framework shapes actual portfolio decisions. In steel — a sector clearly exposed to reindustrialization — GMO holds Nucor and Steel Dynamics, choosing the best-capitalized names specifically because steel is cyclical. Quality provides resilience through the cycle.
The Fastenal story is the clearest illustration of value discipline. GMO knew the company well and wanted the position — a high-quality industrial distributor with strong domestic exposure — but couldn't get comfortable with the valuation at launch in October 2025. They kept the company in active research rather than forcing a position. When Fastenal reported a disappointing quarter and the stock sold off roughly 20%, GMO moved in, buying at prices that reflected sentiment rather than any change in fundamentals. The conviction was there from day one; patience did the rest.
Transportation and Logistics as Picks and Shovels
Union Pacific is DRES's top holding, and Sam's explanation goes beyond the macro tailwind. Union Pacific is in the process of acquiring Norfolk Southern, which would create an end-to-end transcontinental railroad connecting the West Coast to the East Coast. Sam believes the transformative potential of that combination is not priced into the current valuation, because regulatory uncertainty keeps the market from pricing it fully. They are getting paid to wait while holding a company with a structural tailwind and a potentially transformative catalyst.
The broader logic for transportation and logistics is the picks-and-shovels framework: rather than betting on which specific factory gets built, own the infrastructure that benefits from all of it. Rails and trucking move goods regardless of who wins any particular manufacturing contract. Within trucking, a multi-year freight recession has stressed the sector; the companies that survived are the highest-quality operators, positioned well when trucking rates recover.
Bipartisan Durability and Policy Risk
One of the more counterintuitive points Sam makes is how bipartisan the reindustrialization theme actually is. Quotes from Democratic and Republican leaders on domestic resilience are, in his words, almost indistinguishable if you cover the attribution. DRES is not a bet on a single administration. Reshoring and reindustrialization have been building for years and will continue regardless of who is in the White House — making the investment opportunity genuinely durational rather than politically dependent.
Differentiation from Competitors
Other funds exist in the reshoring space. Sam's differentiation argument rests on three things: focus (35 to 40 concentrated holdings, not a broad basket), genuine U.S. revenue concentration (90% vs. roughly two-thirds in XLI, the industrials ETF), and fee discipline at 50 basis points. He also points out that XLI has Uber as a top-10 holding — a company GMO knows well but considers far more tech than industrial. DRES has only one overlap with XLI's top holdings.
Notable Insights
"Beating the market is really hard. It's even harder when you're afraid to look different from the crowd. One of the things I love about GMO is how willing we are to follow our conviction even if it means looking different in the short term."
"In the S&P 500, less than 60% of the revenue for companies in that U.S. index actually comes from the U.S. market. For our portfolio, that's closer to 90%. We really are dialed into that opportunity set."
"We didn't want to launch something that was wholly dependent on who was in the White House or who had control of Congress. The opportunity for reindustrialization is really durational. America spent several decades moving to offshore as much as possible. That's not coming back in a month, a quarter, or even a year."
Key Takeaways
- DRES launched October 2025 at 50 basis points — active, concentrated at 35 to 40 holdings, focused on true U.S. revenue exposure (~90% vs. ~60% in the S&P 500).
- Four proprietary sector buckets replace traditional GICS classifications: manufacturing/automation, transportation/logistics, energy/materials, and defense.
- Quality and value discipline applied at the stock level — Fastenal was held in research until valuation improved after a 20% selloff, then initiated.
- Transportation and logistics is the picks-and-shovels core: rails and trucking benefit from reindustrialization regardless of which specific factories or contracts win.
- The reindustrialization theme is bipartisan and durational — not dependent on any single administration or policy cycle.
- DRES is designed as a satellite complement to tech-heavy, multinational core holdings, providing a differentiated return driver around the reindustrialization mega-trend.
What This Means for Advisors
For advisors building U.S. equity allocations, DRES surfaces a structural blind spot: most U.S. holdings are less domestic than they appear. Blending in a strategy built specifically around genuine U.S. revenue concentration and reindustrialization provides a differentiated return driver alongside whatever core position a client holds — S&P 500, quality, or otherwise.
The reindustrialization theme is still early in advisor consciousness. Sam's observation that "everyone is underweighted" in this area is the core implementation argument — not as a replacement for core equity, but as a satellite that covers what the core does not.
Listen to the Full Episode
This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Sam Klar, listen on Spotify, Apple Podcasts, or watch on YouTube.