In short: Cambria's first 351 fund and "arguably one of my favorite ideas in all of investing, but perhaps one of the worst marketing ideas" — it targets US stocks paying low-to-no dividend, on the argument that for a taxable investor compounding wealth "the last thing in the world you want is dividends." Against today's 1.04% S&P yield the drag is small; the real target is the high-dividend strategies. He thinks the concept is "a 100 billion plus concept at some point," but it is currently his second- or third-smallest fund.
TAX deliberately buys US companies that pay little or no dividend. That sounds backwards until you follow the cash: a dividend takes money out of a business, hands it to you, and — if you hold the stock in a normal taxable account — the government takes a slice before you can reinvest what's left. If your goal is simply to grow the pile, that round trip is pure leakage. A company that keeps the cash, or buys back its own shares instead, achieves the same thing without the toll booth.
Faber calls this his favourite idea and his worst marketing idea, and he's right about the marketing: there is an enormous culture built around dividends as "passive income," and a fund that promises fewer dividends is a hard sell. Right now the drag is small versus the S&P 500, which yields only about 1%; the real comparison is against high-dividend funds, which historically paid 6–10% and taxed their holders accordingly. It remains one of Cambria's smallest funds, though he believes the concept eventually becomes a $100bn category.
16:37So, TAX is a fund that targets stocks paying low to no dividend yield. And if you're reinvesting, the last thing you want is to take money, pay tax, and reinvest it. It's crazy. It's crazy that anyone of you would even consider doing that. And yet, the whole world operates as if that's the ideal scenario. And so, TAX, if it even comes close to matching the indices on an after-tax level, will do much better.
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