John McHugh

John McHugh is the founder of WealthTrust Asset Management. He started at Merrill Lynch in 1988 and was one of the few advisors in the firm's Omega Program allowed to manage portfolios on a discretionary basis. From Merrill, he moved to Credential (which became Wells Fargo Advisors), where he was one of two groups permitted to manage money for other advisors' clients. That experience managing portfolios under the regulatory microscope of a major wireframe led him to eventually launch WealthTrust, building the strategies he'd been running for decades into SMA and model portfolio formats for advisors. On this episode of Behind the Ticker, John joins Brad to discuss WLTG, the WealthTrust Long-Term Growth ETF.

The WealthTrust Process: Quant Rank and Earnings Revisions

WLTG's investment process is built on a proprietary quantitative ranking system that John has been developing and refining since 1988. The system, which he calls Quant Rank, analyzes roughly 9,000 companies and ranks them on a scale from Quant 1 (highest conviction) to Quant 5 (lowest). The core signal driving the ranking is earnings estimate revisions from sell-side research analysts. John's logic is straightforward: analysts get paid their bonuses based on how close their estimates come to actual results, so they have a strong incentive to get their numbers right. When analysts are revising earnings estimates upward for a company, it's a powerful signal that fundamentals are improving.

The numbers are compelling. Since 1988, Quant 1 and Quant 2 companies have averaged roughly 25% annual returns. Quant 4 and Quant 5 companies, where estimates are declining, average only 2-3% per year. That spread of 20+ percentage points annually between the best and worst quintiles, sustained over 35+ years of data, forms the foundation of WealthTrust's approach.

Portfolio Construction: 75% Stocks, 25% ETFs

WLTG's portfolio is approximately 75% individual stock positions and 25% indexed ETFs. The individual stocks are selected based on three criteria: quality companies with strong fundamentals, dividend payers (providing an income component), and companies that are beating or expected to beat their earnings estimates (showing up as Quant 1s or 2s in the ranking system). The 25% ETF allocation provides diversification and risk management, filling in broad market exposure that the concentrated stock picks might miss.

On top of this structure sits a momentum indicator that drives tactical buy and sell decisions. When the momentum indicator signals that a sector or stock is losing its upward trajectory, positions can be trimmed or sold regardless of their Quant ranking. Conversely, the momentum signal helps identify new opportunities in sectors that are rotating into favor. John describes this as tactical in nature, and it applies to both the stock and ETF sleeves of the portfolio.

John makes an important point about his approach to market cycles. Since 1988, he says, there has been an asset class or sector that performed well in every single year except 2008. And even in 2008, Treasuries made money. The Quant Rank system naturally surfaces whatever is working because analyst estimate revisions reflect real-time fundamental trends. When home builders are performing well, they show up as Quant 1s. When commodities are leading, commodity companies rise in the rankings. The system is sector-agnostic and follows the earnings data wherever it leads.

SMA Heritage and the Move to ETF

WealthTrust has been running these strategies in SMA format for advisors for years, providing model portfolios through TAMPs and other distribution channels. The ETF launch was a natural extension: take the same process that's been producing results in separate accounts and package it for broader distribution. John notes that WLTG gives advisors access to the strategy in a single trade rather than having to implement 30+ individual stock positions plus ETFs across every client account.

The performance track record from the SMA history gives the firm credibility that many first-time ETF issuers lack. WLTG's construction, with its blend of concentrated individual stocks and diversified ETF ballast, positions it as a large cap growth allocation in an advisor's model portfolio. John sees it fitting naturally into the growth bucket alongside or as a replacement for traditional large cap growth funds, with the added benefit of the systematic Quant Rank process driving security selection rather than subjective stock picking.

Brad noted that the ETF's construction feels intelligently differentiated. The combination of quantitative earnings-based stock selection, dividend requirements, momentum overlay, and ETF diversification ballast creates a multi-factor approach that doesn't fit neatly into any single existing category. It's not pure quant, not pure fundamental, not pure income, and not pure momentum. It's a blend that reflects three and a half decades of real-world portfolio management experience.

Key Takeaways

• WLTG uses a proprietary Quant Rank system analyzing 9,000 companies based on earnings estimate revisions. Quant 1-2 stocks have averaged ~25% annually since 1988 versus 2-3% for Quant 4-5.
• The portfolio is approximately 75% individual stocks (quality, dividend-paying, earnings-beating) and 25% indexed ETFs for diversification and risk management.
• A momentum overlay drives tactical buy/sell decisions on top of the Quant Rank security selection, helping the fund rotate into sectors where analyst estimates are trending upward.
• John started managing discretionary portfolios at Merrill Lynch in 1988 and has refined this system through multiple market cycles spanning 35+ years.
• The ETF packages WealthTrust's SMA strategy into a single trade for advisors. Learn more at wealthtrustetf.com and wealthtrustam.com.

Listen to the full conversation on Spotify, Apple Podcasts, or YouTube.