As Wall Street figured out that more and more investors are interested in ETFs, they are trying really hard to make their own ETFs look good on the fact sheet. For instance, they will change the formula used for frequent metrics such as the P/E ratio.
In the following article by tHorizon Kinetics, we discover how Power Shares, issuer of the QQQ ETF (tracking the Nasdaq 100 Index), indicate a P/E ratio of 22,1, instead of 41 if it was calculated in a more classical manner (hint : using an harmonic average instead of arithmetic average helps a lot!) => This makes this ETFs look reasonably priced instead of grossly overpriced…
The whole article is available here and is really worth reading.
It would be nice if we could spot other tricks issuers are using to sell us their ETFs!