iQ US MEGA CAP 10 MODEL

Focused U.S. mega-cap leaders

• Rules-based multi-factor discipline

• Equal-weighted 10-stock portfolio

• More balanced sector diversification

• Seasonal, off-cycle rebalancing

• Higher historical return, lower Ulcer Index*

*Past performance does not guarantee future returns.

INVESTMENT OBJECTIVE

Seeks capital appreciation by investing in a concentrated portfolio of 10 equal-weighted US mega-cap equities selected for financial strength, earnings efficiency, and gross profit margin leadership. The strategy targets the highest-quality names within the largest segment of the US equity market, going beyond simple size to identify the companies best positioned to sustain and grow their earnings over time.

Best Fit Index: S&P 100 Index / S&P 500 Index

PROCESS

1. Universe Construction

It all starts with the top 90 U.S. companies by market cap—the biggest, most established names traded on U.S. exchanges - with an average market cap exceeding $600 billion.

2. Three Low-Correlated Parallel Sub-Screens

Sub-Screen 1 — Primary (Cash & Earnings Trend): Narrows to the top 30 by industry-relative cash ratio, identifying mega-cap companies with the strongest cash positions relative to their peers. From there, selects the top 5 by 9-period smoothed earnings trend — combining balance sheet strength with a confirmed improving earnings trajectory.

Sub-Screen 2 — Earnings Efficiency + Institutional Activity: Filters to the top 30 by a composite of earnings score adjusted for dollar volume signal and industry-relative Selling, General, and Administrative-to-sales ratio — rewarding companies with strong earnings characteristics and lean cost structures relative to their industry peers. The final cut selects the top 5 by net institutional ownership activity, identifying names where institutional investors are actively increasing positions.

Sub-Screen 3 — Earnings Efficiency + Gross Margin: Applies the same earnings and cost efficiency composite as Sub-Screen 2, narrowing to the top 25, then selects the top 5 by gross profit margin — isolating mega-cap companies with both strong earnings efficiency and superior pricing power.

3. Final Selection

The three sub-screens are combined and only the names that rank highly across all three sub-subscreens are selected, resulting in a final portfolio of 10 stocks.

Why invest in a focused U.S. mega-cap model?

Own the Real Backbone of U.S. Equity Markets — On Purpose, Not by Default: Most investors own mega-cap stocks through an index fund and never think twice about it. This model asks a harder question — which of these corporate titans are actually the strongest? It screens for financial strength, efficient earnings, and resilient profit margins. The biggest companies and the strongest companies are not always the same thing. This model is built around that distinction.

Address the Concentration Problem Instead of Ignoring It: Ten equal-weighted stocks, chosen for quality rather than sheer size, with a hard cap on how much any single industry can represent. That cap directly confronts the sector crowding that passive investors quietly absorb. The portfolio stays in the heart of the market — just without the hidden concentration risks that come with simply tracking an index.

Rules Over Gut Calls: No headlines, no emotion, no guessing — just a time-tested process that runs the same disciplined screens every time, including a signal that tracks where institutional investors are quietly putting their money to work. Because the model moves differently from a standard index, it also pairs well with other strategies for clients who want real diversification rather than the appearance of it.

Pricing Power Is the Foundation: Companies that consistently rank at the top of their peer group on gross profit margin have something genuinely hard to manufacture — the ability to protect their earnings when costs rise.

Bottom line: you’re still investing in the core of America’s corporate strength—but now, with discipline and clarity.

Potential Risks:

Mega-Cap Concentration Risk The strategy is structurally tied to the largest companies in the market. In periods where mega-cap stocks underperform relative to mid and small caps, there is no mechanism to rotate into other market cap tiers. Earnings Quality Deterioration Smoothed earnings metrics can be slow to reflect accounting adjustments, one-time items, or genuine business deterioration — potentially keeping names in the portfolio longer than underlying fundamentals would warrant. Institutional Crowding Favoring stocks with rising institutional ownership means the portfolio gravitates toward names already heavily held by large investors. In a stress event, simultaneous institutional selling can create outsized downside pressure in the same names the model has flagged as high conviction.