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>>> Re-opening rotation trades are rocking the market: Morning Brief
Yahoo Finance
by Myles Udland
Thu, March 4, 2021
https://finance.yahoo.com/news/re-opening-rotation-rocking-the-market-morning-brief-105403540.html
Tech stocks go red for 2021.
The re-opening rotation trade has been underway for months now.
This trade can broadly be thought of as a move by investors away from stocks that worked in the stay-at-home world of 2020 and into names that should benefit from accelerating economic growth. This new theme kicked off following early November news that Pfizer (PFE) and BioNTech (BNTX) had developed an effective COVID-19 vaccine and has continued almost unabated for more than four months now.
On Wednesday we saw a textbook example of how this trend is playing out with the tech-heavy Nasdaq sliding 2.7% while Energy (XLE), Financials (XLF), and Industrials (XLI) were all higher. Shares of airlines and cruise line operators were also higher on Wednesday while Zoom (ZM) continued its post-earnings slide with the stock now off more than 20% this week and almost 40% from a mid-October record high.
Anything you didn't get to do in 2020 is a winning trade now while the companies that sell the goods and services you were stuck using in 2020 are falling out of favor.
And in a note to clients published earlier this week, the team at Bespoke Investment Group offered a great chart that helps frame this trade not only as a post-pandemic re-opening bet but also as a shift away from the biggest market trends of the last half of the 2010s — market cap concentration.
"At the end of the third quarter of 2020, the 10 largest stocks by market cap in the S&P 500 accounted for 30.86% of the index’s total combined market cap; 4.2 percentage points more than Q2 2000 when the 10 largest stocks’ share peaked at 26.66%," the firm notes.
"But with the ten largest stocks having largely been in consolidation while the rest of the market has pressed on, their share of total market cap has since fallen back below 30%."
Driven by the FAAMNG stocks, the market cap concentrated in the ten biggest stocks in the S&P 500 hit a record high in 2020. But as re-opening trades continue to play out the rally has broadened and the shine has come off some big tech winners.
And so while this chart shows the share of the S&P 500's market cap concentrated in the 10 biggest names is still historically high, the market has been moving away from the big winners not only of the last year but of the last several and into what had been left behind.
Namely: banks, energy, and small caps.
Ben Carlson, director of institutional wealth management at Ritholtz Wealth Management, highlighted on Wednesday the 2020 vs. 2021 performance of tech stocks (QQQ), small-cap value stocks (VBR), and energy. In 2020, the Nasdaq rose 48%, small-cap value stocks were up 6%, and energy was down 32%. In 2021, tech stocks have lost 1.5%, small-cap value is up 13%, and energy is up 31%.
Bloomberg Opinion columnist Conor Sen also flagged Wednesday that there's a growing list of blue-chip companies that were huge COVID winners now looking at tough year-on-year comps with stocks that have come under pressure.
Some of these names include Amazon (AMZN), Home Depot (HD), and Domino's Pizza (DPZ), which all benefitted from pandemic trends like e-commerce, home improvements, and ordering pizza. Each of these stocks is off at least 9% in the last six months while the S&P 500 has gained just under 7%.
A unique market for a unique moment in modern history.
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Horizons Psychedelic Stock Index ETF - >>> Horizons ETFs Launches World’s First-Ever Psychedelic ETF on NEO Exchange
Yahoo Finance
January 27, 2021
https://finance.yahoo.com/news/horizons-etfs-launches-world-first-152800195.html
With much excitement, NEO proudly welcomes Horizons ETFs Management (Canada) Inc. ("Horizons ETFs") back to the NEO Exchange, with the launch of the world’s first-ever psychedelics-focused exchange traded fund. The Horizons Psychedelic Stock Index ETF began trading today under the symbol NEO:PSYK.
This press release features multimedia. View the full release here: https://www.businesswire.com/news/home/20210127005651/en/
Horizons ETFs Management (Canada) Inc. ("Horizons") participates in a digital market open to celebrate their launch of the world’s first psychedelics-focused exchange traded fund. The fund began trading today under the symbol NEO:PSYK.
With a growing number of companies across North America focused on developing therapeutic solutions using psychedelics to treat mental illness, addiction, and other medical conditions, Horizons ETFs is paving the way for investors to access the industry like never before. The Horizons Psychedelic Stock Index ETF contains 17 Canadian and U.S. publicly-listed life sciences companies that have significant business activities in, or significant exposure to, the psychedelics industry - including two NEO-listed companies.
"At Horizons ETFs, we strive to be at the forefront of key global transformative investment themes. We believe the opportunities with psychedelics not only provide a compelling investment case, but also the potential to provide life-changing impacts for those suffering with mental illness," commented Steve Hawkins, President and CEO of Horizons ETFs. "We are happy to be partnering with the NEO Exchange on our launch of PSYK, the world’s first psychedelic stock ETF. NEO has already taken a leadership position in being the first senior exchange to list psychedelic-focused equities, so the NEO Exchange was a natural fit for Horizons ETFs and PSYK. PSYK will give investors diversified exposure to the leading public companies undertaking this important research and the development of treatments for the more than 700 million people globally that, according to the World Health Organization, suffer from some form of mental illness, addiction, or eating disorder."
The Horizons Psychedelic Stock Index ETF joins another Horizons ETF already listed on the NEO Exchange: the Horizons US Marijuana Index ETF (NEO:HMUS). Investors can trade shares of PSYK and HMUS through their usual investment channels, including discount brokerage platforms and full-service dealers. Click here for a complete view of all NEO-listed securities.
"The unprecedented interest in the Horizons Psychedelic Stock Index ETF – even prior to launch – is a testament to the growing acceptance, credibility, and progress that the psychedelics industry and companies within it have achieved over the past few years," commented Jos Schmitt, President and CEO of NEO. "With the listing of MindMed and Cybin on the NEO Exchange in 2020 – two major holdings in the PSYK fund - NEO prides itself on being an advocate and catalyst for the continued growth of the psychedelics space. We are thrilled to partner with the team of financial visionaries at Horizons ETFs as we work together, once again, on forming the future of investments."
NEO consistently represents roughly 20% of all volume traded in Canadian ETFs and close to 15% of all trading in Canadian-listed companies.
About NEO Exchange
NEO Exchange is a progressive stock exchange that brings together investors and capital raisers within a fair, efficient, and service-oriented environment. Fully operational since June 2015, NEO puts investors first and provides access to trading all Canadian-listed securities on a level playing field. The NEO Exchange lists senior companies and investment products seeking a stock exchange that enables investor trust, quality liquidity, and broad awareness including unfettered access to market data.
Connect with NEO: Website | Twitter | LinkedIn | Instagram
About Horizons ETFs Management (Canada) Inc.
Horizons ETFs Management (Canada) Inc. is an innovative financial services company and offers one of the largest suites of exchange traded funds in Canada. The Horizons ETFs product family includes a broadly diversified range of solutions for investors of all experience levels to meet their investment objectives in a variety of market conditions. Horizons ETFs has over $17 billion of assets under management and 94 ETFs listed on major Canadian stock exchanges. For further information about PSYK, please visit: www.HorizonsETFs.com/PSYK
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ETF List - highest return -
https://etfdb.com/compare/highest-ytd-returns/
POTX Global X Cannabis ETF 67.58%
THCX Cannabis ETF 49.76%
CNBS Amplify Seymour Cannabis ETF 49.05%
MJ ETFMG Alternative Harvest ETF 47.87%
FUE MLCX Biofuels ETN 42.18%
YOLO AdvisorShares Pure Cannabis ETF 36.59%
PRNT 3D Printing ETF 34.48%
GERM ETFMG Treatments Testing and Advancements ETF 33.34%
TOKE Cambria Cannabis ETF 32.79%
MOON Direxion Moonshot Innovators ETF 30.86%
CNRG SPDR S&P Kensho Clean Power ETF 26.93%
MSOS AdvisorShares Pure US Cannabis ETF 25.48%
ARKQ ARK Industrial Innovation ETF 22.01%
PBW Invesco WilderHill Clean Energy ETF 21.87%
REMX VanEck Vectors Rare Earth/Strategic Metals ETF 21.03%
GXTG Global X Thematic Growth ETF 20.03%
SPCX The SPAC and New Issue ETF 19.19%
QCLN First Trust NASDAQ Clean Edge Green Energy Index Fund 18.61%
ACES ALPS Clean Energy ETF 18.33%
HAIL SPDR S&P Smart Mobility ETF 18.03%
ARKK ARK Innovation ETF 17.99%
KOMP SPDR S&P Kensho New Economies Composite ETF 17.40%
BLOK Amplify Transformational Data Sharing ETF 17.35%
GIGE SoFi Gig Economy ETF 16.22%
XBI SPDR S&P Biotech ETF 15.95%
ARKW ARK Next Generation Internet ETF 15.84%
SBIO ALPS Medical Breakthroughs ETF 15.81%
ARKG ARK Genomic Revolution ETF 15.78%
IRBO iShares Robotics and Artificial Intelligence ETF 15.19%
Growth rates by sector for 2020, 2021 -
https://finance.yahoo.com/news/profit-rebound-ripe-sector-etfs-050000165.html
2020 Earnings Growth*
2020 Return
2021 Earnings Growth *
Energy (XLE)
-107.40%
-32.50%
N/A
Industrials (XLI)
-48.60%
11.00%
73.40%
Consumer Discretionary (XLY)
-31.30%
29.60%
59.70%
Materials (XLB)
-10.90%
20.50%
32.40%
S&P 500 (SPY)
-12.30%
18.40%
22.60%
Financials (XLF)
-20.60%
-1.70%
21.30%
Technology (XLK)
5.60%
43.60%
14.40%
Communication Services (XLC)
-3.90%
26.90%
13.70%
Health Care (XLV)
10.80%
13.30%
10.90%
Consumer Staples (XLP)
3.80%
10.10%
6.20%
Utilities (XLU)
1.90%
0.60%
5.30%
Real Estate (XLRE)
-3.40%
-2.10%
4.80%
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>>> Thematic ETF-Of-ETFs Launches
Yahoo Finance
by Heather Bell
January 29, 2021
https://finance.yahoo.com/news/thematic-etf-etfs-launches-144500576.html
Today, Main Management rolled out its second ETF. Like the $682 million Main Sector Rotation ETF (SECT), the Main Thematic Innovation ETF (TMAT) is actively managed and invests primarily in other ETFs in order to capture the theme of disruptive innovation.
TMAT comes with an expense ratio of 1.65% and lists on Cboe Global Markets, the parent company of ETF.com.
Main Management is, at its core, a firm driven by fundamental investment principles and seeks out growth at a reasonable price across its strategies, according to Director of Research Alex Varner. He notes that the strategy underlying the ETF has been available through Main Management via a separately managed account since June 2020.
“A lot of what we’re seeing now is technology driven. It’s that application of technology across the sectors that’s exciting,” Varner said.
Investment Approach
TMAT looks to target disruptive and innovative themes with large market demand, seeking out those that seem to have been mispriced or underestimated by the market, the prospectus says, noting this is a common occurrence with disruptive innovation.
According to the document, the fund managers set price targets for different positions that may be frequently revised upwards and holds those positions until that price target is achieved or the opportunity dries up. It points out that the targeted themes may take years to develop, meaning some positions potentially can be held for decades. The portfolio is rebalanced as needed.
The investment process involves assessing the big picture to uncover disruptive themes, looking at macroeconomic fundamentals, growth forecasts, drivers of growth and consumer behavior. The themes under consideration currently include everything from genomics to artificial intelligence to cloud computing to pet care, the prospectus says.
The portfolio generally holds five to 15 different ETFs, according to the fund document. However, right now, Varner says that there are 11 holdings in the portfolio. Those include the likes of the ARK Genomic Revolution ETF (ARKG), the ARK Fintech Innovation ETF, the ProShares Online Retail ETF (ONLN), the VanEck Vectors Video Gaming and eSports ETF (ESPO) and the Global X Robotics & Artificial Intelligence ETF (BOTZ).
Varner notes that the entire portfolio offers exposure to roughly 350 different company names, with a heavy tilt toward midcap stocks. He adds that the median market cap for those names in TMAT is at $6 billion, while the Nasdaq-100 has a median market cap of $50 billion. Further, typical FANG names are less than 5% of the whole portfolio, and although Amazon is the largest single stock exposure, it represents less than 2.5% of the portfolio, he says.
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
TMAT can also implement option strategies in the form of covered calls and covered puts in order to smooth out performance or enhance returns, according to its prospectus.
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Solar, hydrogen, cannabis - >>> 3 Megatrends (and 9 Stocks) to Buy for the ‘Blue Wave’
InvestorPlace
by Luke Lango
January 8, 2021
https://finance.yahoo.com/news/3-megatrends-9-stocks-buy-202123294.html
The most attention-grabbing thing that happened? The storming of the U.S. Capitol when Congress was in session and in the process of confirming Joe Biden as the next President of the United States.
Talk about wild!
But – while that event may have dominated the news headlines, and rightly so – it was mostly a non-event for markets. They didn’t care.
Why?
Because something far, far more important happened this week. Something that will have lasting and significant impact on the economy and on markets.
That thing, of course, is Democrats flipping control of the Senate.
Democrats needed to win both Georgia Senate runoff elections to tie Republicans in terms of number of Senate seats, with the tie-breaker going to Vice President-elect Kamala Harris (who is, of course, a staunch Democrat).
They did just that. Both Democratic candidates won their runoffs in Georgia. Now, Democrats are in control of the Senate for the next two years.
They will also control the White House and the House of Representatives. Which means President-elect Joe Biden is now in a position of strength when it comes to enacting sweeping legislation that will meaningfully impact the U.S. economy.
Ostensibly, that may seem like a bad thing for markets, because Democrats want higher taxes and tighter regulation. But the stock market actually rallied big on the news.
Why?
The general thinking is that what Democrats want to do first (provide stimulus to combat Covid-19 economic impacts and combat climate change) is a net positive for the economy and financial markets. The higher taxes and tighter regulation part will come later. Maybe not even before the 2022 midterms, and even if it does, the split of power in Congress is so equal that any successful legislation on those fronts will very likely have to be moderate in nature.
Thus, Wall Street sees a “Blue Wave” as a win for the economy. You get guaranteed big stimulus now, and maybe moderately higher taxes and somewhat tighter regulation a few years from now.
Don’t be afraid of the Blue Wave … embrace it. The fundamentals underlying the U.S. economy and the stock market remain healthy and vigorous. The outlook for stocks to push higher both in 2021 and throughout the next several years remains robust.
With all that said, the Blue Wave is a particularly bullish development for three industries. Democrats flipping the Senate essentially propelled these three megatrends into hypergrowth mode – and now all three trends are positioned for several years of huge gains ahead.
Which industries am I talking about?
Solar, hydrogen and cannabis.
Solar energy adoption was already on a huge upswing before the 2020 Election. Falling costs, improving technology and shifting consumer demand all compelled homeowners and businesses alike to more seriously consider installing solar panels. Now, significant political catalysts are in the pipeline, too, as a Democratic-controlled government will almost certainly make it a priority to pass major clean energy bill in 2021. Meaningfully upping and extending solar subsidies will likely be the focal point of that bill.
In other words, the solar market is primed for several years of hypergrowth ahead.
The story on the hydrogen front is very similar. Hydrogen subsidies will likely also be significantly increased and extended in 2021-22. This major political tailwind will couple with economic tailwinds (hydrogen costs are steadily falling) and technology tailwinds (the emergence of “green hydrogen” has enabled a new era of zero-emission hydrogen production) to spark a boom in the Hydrogen Economy in the 2020s.
Pivoting to cannabis, this megatrend is all about legal developments. The demand is there. We know that. Just look at the black market for cannabis. That’s a $70 billion industry in the U.S. alone – and a multi-hundred-billion-dollar industry globally.
Thus, the cannabis megatrend isn’t about generating new demand for weed. It’s about transferring the already enormous demand for weed from the black market to the legal market. A Blue Wave, which paves a clear path toward federal cannabis legalization, is a huge step in this transfer of demand. It also comes on the heels of Canada federally legalizing cannabis, and Mexico doing so soon.
All in all, the geopolitical stage is set for enormous global cannabis demand to shift into the legal channel over the next decade. This seismic shift will power big gains in marijuana stocks.
Big picture: It’s time to get extra bullish on hypergrowth solar, hydrogen and cannabis stocks.
My top picks?
I like three stocks in each industry:
9 Hot Stocks to Buy Across 3 Scorching Megatrends
In solar, I like SunPower (NASDAQ:SPWR) for its unmatched leadership in the premium solar installation category, Maxeon Solar (NASDAQ:MAXN) for its strong technical expertise in manufacturing the world’s best solar panels and SolarEdge (NASDAQ:SEDG) for its dominance in the increasingly important solar optimizers and inverters market.
For hydrogen, I like Plug Power (NASDAQ:PLUG) as the Hydrogen Economy leader building on its early dominance in supplying hydrogen fuel cells to the materials handling market, Bloom Energy (NYSE:BE) for its ability to leverage fuel cells to help businesses generate sustainable and cost-effective off-grid power, and Ballard Power (NASDAQ:BLDP) because the company is emerging as a mini-Plug Power of sorts in the transportation market (providing fuel cells into transit end-markets).
Finally, in cannabis, I’m most bullish on Canopy Growth (NASDAQ:CGC) because of its multi-billion-dollar cash balance that gives it unmatched firepower to invest in the emerging marijuana industry, GrowGeneration (NASDAQ:GRWG) because this small retailer is rapidly turning into the “Home Depot of Cannabis” and WM Holdings (NASDAQ:SSPK) for its Weedmaps platform that is already established as the “Google of Marijuana.”
These nine stocks represent the highest-quality, biggest-upside plays on the solar, hydrogen and cannabis megatrends.
And each of those megatrends is ready to sprint into hypergrowth mode.
It doesn’t take a rocket scientist to connect those dots.
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>>> ARK ETFs Are More Popular Than Ever
Barron's
By Evie Liu
December 28, 2020
https://www.barrons.com/articles/ark-etfs-are-more-popular-than-ever-what-it-means-for-investors-51608850491
Thanks to their stellar performance, exchange-traded funds offered by ARK Investments have been sought after by investors throughout 2020. The chase has intensified in December, and some are ringing alarms.
Led by economist and innovation investor Cathie Wood, ARK has been one of the most compelling stories in the money-management world this year. Just six years into its existence, the company has achieved tremendous success with its investment returns and has taken in a huge amount of cash as a result.
Five of ARK’s actively managed ETFs have returned an average of more than 150% year to date—thanks to their large bets on highflying stocks like Tesla (ticker: TSLA) and Square (SQ). The best performer, ARK Genomic Revolution (ARKG), gained 203%; even the worst-performing ARK Autonomous Technology & Robotics (ARKQ) more than doubled investors’ money over the past year.
The strong performance has made the ARK funds all the more desirable for investors, who have poured millions of dollars in every day during the second half of 2020. The pace just picked up to a record level over the past month.
In December, ARK Investments took in nearly $6.8 billion new assets, the third most only behind ETF giants Vanguard and BlackRock’s (BLK) iShares, according to data from FactSet. That’s especially impressive considering ARK has seven ETFs under its sleeve, while BlackRock and Vanguard have hundreds.
The company’s flagship product, the ARK Innovation ETF (ARKK), alone attracted $2.9 billion in December, representing about 15% of the fund’s total assets as of Thursday. ARK Genomic Revolution has seen an even sharper uptick: Its $2.2 billion asset inflows this month represent nearly 30% of the fund’s total size.
This Wednesday alone, investors poured $317 million and $410 million, respectively, into the two funds right before the Christmas market break. Both hit a record of daily inflows since the funds’ launch. The much larger SPDR S&P 500 ETF (SPY) was the only fund that topped their flows on Wednesday.
With its huge assets and concentrated portfolios—the company’s ETFs typically hold less than 50 stocks—ARK now owns more than 10% of at least 15 different stocks, including software company PagerDuty (PD) and biotech firm Seres Therapeutics (MCRB).
Investor fervor for the ARK funds is ringing alarms for some strategists on Wall Street, however, who are drawing parallels to the incredible run of some growth funds in the late 1990s in the middle of the dot-com bubble. As we know, that chase for returns didn’t end well.
“As always, nothing exceeds like success,” writes Financial Insyghts’ Peter Atwater, who worries that the rapid increase in assets and the high prices paid by the newest investors could lead to trouble ahead.
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>>> 5 high-growth themes and the stock-market ETFs that can deliver big gains in 2021
MarketWatch
Jan. 6, 2021
By Jeff Reeves
https://www.marketwatch.com/story/5-high-growth-themes-and-the-stock-market-etfs-that-can-deliver-big-gains-in-2021-11609952097?siteid=yhoof2
Cannabis, 5G, clean energy and other strategies for stock-market outperformance
Wall Street closed the books on 2020 with a decidedly good year for U.S. stocks. But as is so often the case, your performance varied significantly depending on what you owned.
I’m not talking about stock-picking; picking the “right” index was just as important. Consider that for the year, the Nasdaq-100 NDX, +2.51% increased roughly 44%, its fifth-best year ever. The S&P 500 SPX, +1.48% had a pretty good year too, but its returns of about 16% were only roughly a third of the Nasdaq-100’s gains. Lagging even farther behind was the Dow Jones Industrial Average DJIA, +0.69%, up only 7% on the year.
The root cause lies in the fact that the Nasdaq-100 has more than 40% of its assets in tech and only about 2% in financial services. Full diversification obviously reduces your risk, but also prohibits you from notching big gains.
So if you’re looking for outperformance in 2021, it may be worth biasing your portfolio just a bit toward a high-growth sector. It doesn’t have to be something as vanilla as “technology,” as a universe of sophisticated funds allow investors to zero in specific trends without buying individual stocks.
Here are five such tactical sector funds that may be worth looking into to tap into significant outperformance over your standard index funds.
Marijuana ETFs
In November, voters in New Jersey, Arizona, Montana and South Dakota legalized recreational marijuana in their states. That makes 15 states and Washington, D.C., that have legalized marijuana for adults — and 36 states that allow medicinal use of marijuana. Furthermore, incoming President Joe Biden has embraced the notion of decriminalizing possession at the federal level.
This trend has captivated many investors, but volatility in individual stocks has means you could be in for a wild ride as the emerging cannabis industry struggles through its growing pains. After all, many dot-com stocks didn’t make it thanks to misreading the market or being outmaneuvered out by competitors. For those interested in playing this broader trend, then, a basket of marijuana stocks rounded up in an ETF could be just the ticket.
Among the funds in the marijuana space, the ETFMG Alternative Harvest ETF MJ, +2.66% is the largest and most established with almost $1 billion in assets. Its biggest holdings include Aphria APHA, +2.38% and Canopy Growth CGC, +1.46%. In 2020, this ETF fell 11.6%, after taking into account reinvested dividends.
A new and fast-growing ETF worth a look is direct the AdvisorShares Pure US Cannabis ETF MSOS, +2.83% that launched in September. It is actively managed and includes indirectly related companies, microcap marijuana startups and other interesting twists on this trend. The ETF is reasonably established with $250 million in assets, and could be worth a look for those looking to cast a wider net on the sector.
Fintech ETFs
Coronavirus created quite a disruption to the global economy in 2020, and complications still linger. However, the pandemic proved once and for all the power and portability of digital technologies. This is old news to retailers, many of whom have been feeling the pain at bricks-and-mortar stores for years, but it’s a trend other areas of the economy have been slower to embrace — including financial services.
PayPal PYPL, +3.62% may be the first name many MarketWatch readers think of in the fintech arena, as they have likely used one of its mobile payments services, including Venmo or Xoom. But fintech applications run much deeper than what consumers may see. A good example is New Zealand-based Xero XROLF, -2.57%, which offers cloud-based accounting services to small businesses, or the $75 billion powerhouse Fiserv FISV, +0.22% that provides automated compliance and fraud-protection technologies.
These kind of enterprise-oriented services always had a place, but amid social distancing and remote working, they proved their true potential to businesses — and those customers could likely double down on them in 2021.
Global X FinTech ETF FINX, +0.85% is one of the best options to look at if you believe in the fintech megatrend. This $1 billion ETF is a who’s who of the space, with big names like PayPal as well as smaller firms with a lot of growth ahead of them like digital invoicing firm Bottomline Technologies EPAY, +1.99%. There are other ETFs out there, some of which play specific trends like mobile payments or blockchain if you’re into that, but this is an established option with a lot of interesting holdings.
5G ETFs
I’m sure you’ve run across your fair share of ads that sing the praises of one wireless provider’s 5G network over the others. As an investor, you should worry more about who’s upgrading all these networks rather than which provider is truly faster.
The real opportunity here for investors is that obsolete telecom infrastructure necessarily means big business for firms helping the likes of AT&T T, +0.27% and Verizon VZ, -0.23% upgrade their networks. This includes communications chip maker Qualcomm QCOM, +2.98%, networking service firm Ciena Corporation CIEN, +1.83% and a host of others.
It remains to be seen whether Big Telecom can squeeze more profits out of all this or whether 5G is just a costly exercise in customer retention, but either way it creates a big opportunity for the companies building and maintaining next-gen telecom networks.
The First Trust Indxx NextG ETF NXTG, +1.47% is a great tactical ETF to consider if you want to play this long-term investment in telecom infrastructure and ride this growth trend in 2021. It holds a wide array of interesting names, from direct plays like chipmakers to opportunities that are a bit removed like data center and cloud-computing infrastructure giant Digital Realty Trust DLR, +1.14%. It’s also an established fund with $800 million in assets and excludes the legacy telecoms you may find in other funds.
Clean Energy ETFs
With Democrats seizing control of both Congress and the White House, climate change is firmly back on the national agenda. Europe is already well ahead of U.S. alternative energy efforts, with the European Union hammering out its Green Deal that plans to make the entire continent carbon-neutral by 2050.
Even the U.K., which formally left the EU thanks to Brexit, has continued on a path to a sustainable future as half of all its electricity generation was attributable to wind power in 2020.
This global focus on climate change and carbon emissions means big things for clean energy stocks, particularly names in the wind and solar space that already have seen strong interest from Wall Street over the past few years.
The most established ETF to play this trend is the iShares Global Clean Energy ETF ICLN, +6.40%, which covers companies in every geography and in every segment of alternative energy and boasts almost $5 billion in assets. Perhaps most important, while it does have some plays with vague EV applications, such as hydrogen fuel cell stock Plug Power PLUG, +35.11%, it is indeed a play on alternative energy — unlike the some funds, like the Invesco WilderHill Clean Energy ETF PBW, +7.68% that roughly tripled last year thanks to boasting Nio NIO, +7.49% as a top holding.
If you want to play EVs, there are plenty of ways to do that. But this iShares ETF is a broader play on green energy that could do very well in 2021.
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>>> 'Blue Wave' Lifting These ETFs
Yahoo Finance
January 6, 2021
https://finance.yahoo.com/news/blue-wave-lifting-etfs-191500800.html
Detailing market moves can feel like chasing a moving target. But it’s worth noting that early Wednesday, following Tuesday’s outcome of the Georgia Senate runoff election, the market was reacting to the many changes—from taxation policy to company oversight to health care and the environment—that could come ahead.
From a sector perspective, the immediate winners and losers seem to be largely in line with expectation of what parts of the market will benefit from Democrats controlling the House, Senate and White House.
The best-performing sectors Wednesday morning were financials, clean energy, health care and materials, measured here by the performance of the Select Sector SPDRs: the Financial Select Sector SPDR Fund (XLF) was up 4.6% early on, the Energy Select Sector SPDR Fund (XLE) was up 4.2%; and the Materials Select Sector SPDR Fund (XLB) was up 3.6%. For perspective, the SPDR S&P 500 ETF Trust (SPY) was up 0.9%.
What’s Behind The Moves
Higher interest rates and talk of big infrastructure spend are supporting financials and materials. There's a narrative circulating also about a so-called reflation trade that supports these sectors tied to the reopening of the economy. Energy is a more complex story, in which some value-chasing has been supporting that sector for a while, and now news of oil production cuts in Saudi Arabia are further buoying the sector, so the strength seen Wednesday could have more to do with these driving forces than the election itself.
The real energy-related winners, however, are only a small part of XLE—the clean energy names. During his campaign, President-Elect Joe Biden talked about a $2 trillion investment in clean energy over his tenure, boosting ETFs like the Invesco Solar ETF (TAN) more than 7% this morning; the iShares Global Clean Energy ETF (ICLN) was up more than 5%. These ETFs, and others in this segment, first got a jolt in the arm during the presidential debates in the fall when talk of massive investment in clean energy first came up, but the outcome Tuesday breathes new air into that upward momentum. And all together, the day’s news was rising the energy tide, lifting all boats.
The flip side of the trade was technology. There’s renewed concern that a Democrat government will be stricter and more heavy-handed with big technology companies, and that weighed on the segment today. That could mean anything from anti-trust action to the blocking of future mega tech mergers along with other regulatory actions aimed at the largest tech companies.
Technology—the long-standing winner of recent years—may have been poised for a correction of some sort anyway, but the outcome of the election has definitely cast a shadow on the sector, at least initially. The Technology Select Sector SPDR Fund (XLK) was down 0.3% early Wednesday.
And finally, there’s healthcare. One of the most sensitive sectors to the political environment was up marginally this morning, with Health Care Select Sector SPDR Fund (XLV) rising 0.9%. The prevailing market idea seems to be that Democrats controlling Congress and the White House won’t bring any meaningful changes to the industry, but as we've seen in the past, changes in leadership often lead to changes in policy that impact this sector, so it remains to be seen what happens next.
Marijuana ETFs Heat Up
Outside of sectors, an interesting pocket rallying on the heels of the election was marijuana ETFs. The largest of the group, the ETFMG Alternative Harvest ETF (MJ), with nearly $1 billion in assets under management, was up 10% in early trade. The AdvisorShares Pure Cannabis ETF (YOLO), an actively managed ETF, was up 8.77%. Pot stocks were hot.
Because marijuana is a controlled substance, businesses engaged in the selling and cultivation of cannabis are blocked from using the federal banking system, which is a major roadblock for an industry striving to go mainstream. The inability to use credit cards or FDIC-insured banks for transactions has been a limitation for the industry, as well as a hindrance to investment. Democrats are expected to be friendlier to this industry, possibly opening the doors for decriminalization at the federal level, and for investment access to what's considered a very growth-y part of the market.
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>>> Marijuana ETFs Get Second Wind
MarketWatch
October 20, 2020
https://finance.yahoo.com/news/marijuana-etfs-second-wind-193000994.html
For marijuana ETFs, the last 24 months have been a total bummer, with nothing but stems and seeds to show for returns.
For all the enthusiasm we saw in these ETFs’ early days, the reality that the halcyon-days sentiment could not sustain this brave new world of ETF investing that has now taken root.
Returns in the past 24 months are negative, mired in losses of 48%-68%.
In fact, most pot ETFs have been riding a slow decline pretty much since they burst onto the scene in 2019. Only the first-to-market—and largest—marijuana ETF, the ETFMG Alternative Harvest ETF (MJ), has managed to make any money for investors, and that was back in 2018, when it was the lone game in town and there was excessive speculation on publicly traded pot stocks in Canada.
Fanfare Unmatched By Returns
MJ’s quick rise to adoption unleashed a wave of marijuana ETF launches, including:
AdvisorShares Pure Cannabis ETF (YOLO) is an actively managed marijuana ETF with the second-highest assets under management of $62 million and an expense ratio of 0.74%.
The Cannabis ETF (THCX) is a market-cap-selected and -weighted index of North American cannabis companies, which has $21 million in AUM and a 0.70% expense ratio.
Global X Cannabis ETF (POTX) tracks an index of developed-market companies related to cannabis, hemp and CBD, and has $15 million in AUM and a 0.50% expense ratio.
Amplify Seymour Cannabis ETF (CNBS) is also actively managed, and is the smallest marijuana ETF, with $6 million in AUM and a cost of 0.75%
MJ has $574 million in AUM and a 0.75% expense ratio. At one point, MJ topped $1 billion in assets, but outflows in the fund picked up as performance fell into a stupor.
Several other marijuana ETFs have since come to market. (Click here for a complete list of marijuana ETFs.) But the above group represents what has been happening since the novelty of being able to invest in a marijuana ETF became available in 2018.
The 2018-2019 period was right before and after Canada legalized marijuana on a federal level. That proved to be a powerful catalyst for an emerging segment that has since fizzled.
Second Wind May Be Blowing
But this October has been a different ride. There’s been an abrupt turnaround on the back of another potential breakthrough decriminalization story.
What you would think would be a widely covered news story during a presidential campaign went largely unnoticed by the public. A U.S. House vote in late September pushed a big turn of the wheel toward legalization of marijuana nationally. As reported by Investor Place:
“In late September, a U.S. House vote to remove marijuana from the federal Controlled Substances Act was delayed until after the presidential election. If the House remains controlled by Democrats, industry analysts expect the Marijuana Opportunity Reinvestment and Expungement (MORE) Act to potentially pass before the end of 2020. Then, it would be up to the Senate to possibly take a similar action…. Democratic vice president nominee Kamala Harris has recently said marijuana would be decriminalized at the federal level under a Biden administration.”
The news did not go unnoticed to traders who have been bidding up marijuana ETFs since the beginning of the month. While marijuana can currently be legally sold to recreational users in a dozen states, decriminalization at a federal level has bigger implications for the market.
Final Piece In The Pot Biz Puzzle
Because marijuana is a controlled substance, businesses engaged in the selling and cultivation of cannabis are blocked from using the federal banking system, which is a major roadblock for an industry striving to go mainstream. The inability to use credit cards for transaction or FDIC-insured banks has been a limitation for the industry, as well as a hinderance to investment.
Some investors simply cannot invest in an industry deemed illegal on a federal level. If decriminalized, however, marijuana-linked companies can enter the federal banking system, access capital markets and even list on exchanges. That would be a breakthrough for this industry.
Even without legalization, U.S. retail sales of cannabis products are expected to double by 2024 to some $30 billion, according to Marijuana Business Daily. Certainly, a legitimized $30 billion industry with revenues doubling in a few years would attract top investors globally.
The other boon federal decriminalization could unleash is to open the doors for some of the world’s top food, beverage and tobacco companies like Coca-Cola, Philip Morris and Constellation Brands to enter the marijuana industry and take it to the next level.
While the status quo remains the same for now, and the outcome of a U.S. presidential election next month remains to be seen, the winds of a better future are certainly blowing in this sector’s direction.
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>>> The Biggest Techs Can Get Bigger—and More Profitable. A Veteran Analyst Tells Why.
Barron's
By Al Root
Oct. 16, 2020
https://www.barrons.com/articles/a-veteran-analyst-on-why-the-biggest-techs-will-get-bigger-51602871471?siteid=yhoof2
Veteran analyst Steve Milunovich explains why Nvidia, Shopify, and ServiceNow have staying power.
When Steve Milunovich started his career as a technology analyst in 1983, personal computers were just starting to become ubiquitous. He didn’t have email for another decade.
In the 37 years since, he’s been a critical, and crucial, observer of virtually every technological trend—and every company behind it—through decades of political and cultural change. Investors and business leaders have been wise to listen to him; those who didn’t often regretted it. In 2003, Milunovich penned an open letter to Sun Microsystems CEO Scott McNealy warning that the company needed to embrace Linux or risk irrelevance. Sun stock peaked in 2000 at $258.63. Oracle (ticker: ORCL) bought Sun in 2010 for $9.50 a share.
In 2010, he recommended Tesla (TSLA) stock, and referred to Elon Musk as the next Steve Jobs. Tesla has earned investors about 59% a year over the past decade.
Calls like those landed Milunovich in Institutional Investor’s All-America Research Team Hall of Fame; he recently retired after many years at Wolfe Research. Barron’s sat down with Milunovich—virtually, of course—to hear his views on tech after all these years. An edited version of that conversation follows.
Barron’s: The Nasdaq is up 31% this year, crushing the S&P 500’s 7%. Are we heading into a bubble?
Steve Milunovich: Today does rhyme, at least, with the [1999] tech bubble. And valuations are at extremes. You’ve got day traders coming back, and SPACs [special purpose acquisition companies]. Those all seem to be signs of excess exuberance.
Tech investors who have a bit of a value bias, or just can’t buy stocks at 30 times sales, are extremely frustrated. Many of them were around during the [dot-com] bubble, and they’re waiting for this to blow up. They’re saying, “We know how this ends. We just don’t know when.” To some degree, I’m in that camp. Even growth investors are concerned. In 1999, everybody understood it was getting crazy. But if you weren’t in Yahoo! and other stocks that were hot, you were underperforming and at risk of losing your job. Today has some similarities to that. From a fundamental standpoint, it does feel different. We’re beyond valuing eyeballs.
True, the metric of price-to-eyeballs was used to justify impossible price/earnings ratios. Today, cloud-based software companies like Zoom Video Communications [ZM] and Salesforce.com [CRM] are trading at triple-digit P/Es, while others, like Slack [WORK], lack earnings. Is that justifiable?
A lot of these software-as-a-service companies do have visibility on business. You can make a case that with 30% revenue growth and [improving] margins, some of these valuations are justified. And the current ability to generate free cash flow is a difference between today and the tech bubble.
And the coronavirus has sped up the pace of tech adoption.
Covid-19 has been a real accelerant to digital transformation—and Covid is hanging around. When I talk to resellers, they believe that over half of employees will not go back to offices. There’s an increasing belief that there’s a secular tailwind here.
There’s concern, however, that the economy could not come back; that’s an issue even for software companies. And I still worry about valuations. We are also now seeing the promise of the internet that people back then anticipated. We are seeing technology become pervasive in its effect on other industries. The total addressable markets for these companies is much bigger than forecasted.
What’s a big trend you’re watching?
Perhaps the most important thing in the last five to 10 years is the rise of the platform company—a company that sits between two user groups and benefits from network effects. It really is a different form of corporate structure. It inverts the corporation, so that the value is created outside the corporate walls [by others].
Define platform company.
There are two types of platform companies. [First] are platforms that create a transaction between a buyer and a seller, like Uber Technologies [UBER]. The platform company is in the middle, taking a piece of every transaction. The other type is the ecosystem company. Microsoft [MSFT] and Apple [AAPL] create ecosystems with lots of third-party value. Amazon.com [AMZN], Alphabet [GOOGL], and Facebook [FB] are ecosystem-style platform companies. Also Alibaba [BABA] and maybe Tencent [TCEHY]. Visa [V] and Mastercard [MA] are in our tech universe. You can debate that.
Those are huge companies.
Nine of the 10 largest tech companies by market value are platform companies. They’ve been getting stronger as they get bigger, and that, of course, brings antitrust concerns. They get huge because they have very fast revenue growth, because of increasing returns—the more buyers, the more sellers; the more sellers, the more buyers. You get very profitable companies. They still have three to five years of double-digit earnings growth in front of them.
What could limit their growth?
When you look back at technology leaders, they tend to fall off over time. There comes a point where size works against you. That hasn’t yet happened to these companies. So we’re in the middle innings, before size becomes a problem. IBM [IBM] and Microsoft went through their issues. Antitrust challenges definitely affected their ability to operate, and caused them to be less aggressive than they might have been otherwise.
But on the positive side, it wasn’t antitrust that got them—it was disruptive technology. In the case of IBM, it was the rise of the microprocessor that changed the economics of computing. For Microsoft, it was first the internet, and later mobile, which they missed.
What’s the next disruptive trend?
The new technologies we all think about: the Internet of Things, artificial intelligence, autonomous driving. The platform companies are leaders in those areas; they have the resources. I don’t yet see smaller companies that are going to put them on their back feet.
You’re not concerned that these platform giants will be broken up?
There is certainly some risk; I don’t think it’s going to be the death knell. Breaking them up is negative for consumers, and historically U.S. antitrust regulation uses consumer harm as the criterion. Breaking up a Facebook or a Google would probably reduce the network-effect benefit of the multiple businesses they are in. Regulators might take away the ability to make acquisitions; that‘s concerning. Now everybody looks back and says, “Oh, Facebook shouldn’t be allowed to buy Instagram,” although, at the time, nobody knew Instagram was going to be anything like what it is today.
U.S.-China relations have been deteriorating. What do you foresee?
The China situation goes well beyond the trade concerns we had last year. It’s a philosophical issue in terms of the way the two countries want to run their governments. There’s plenty of evidence that China has stolen U.S. technology for many years, and put companies like Motorola and Nortel in very difficult positions. Espionage helped Huawei [China’s largest tech conglomerate] create products comparable to Nortel and other comm-equipment vendors, then [China] underpriced them. To its credit, the Trump administration woke up to that. China wants to become a technology power. It needs indigenous capabilities. The one thing it has not had is semiconductors.
Semiconductors are used in virtually every electronic device.
I would argue that Taiwan Semiconductor [TSM] has become the most important tech company in the world. Intel [INTC] is having problems; it has fallen behind in fabrication tech and has suffered product delays. TSM is fabbing [fabricating] 80% of the semis used in the U.S. It might actually build a fab in the U.S. in the next four years.
China wants to build its own semi industry. But the equipment makers and software makers are American. The U.S. is trying to hit Huawei and not allow it to buy semiconductors from the U.S. We allow them to buy semiconductor capital equipment and tools—but they can’t design semiconductors if they don’t have software. Probably the status quo will be maintained: The U.S. will limit certain technologies, but a total cutoff of U.S.-based semiconductor-tools technology would cause repercussions.
Any favorite stocks?
[At Wolfe Research] we did a more quantitative screen with a mix of fundamental technical and quantitative factors. When you look at some of the big outperformers over the last six to 12 months—names like Shopify [SHOP], Nvidia [NVDA], ServiceNow [NOW], PayPal [PYPL]—these companies, I do believe, have sustaining powers. They are category creators.
The most powerful thing a tech company can do is create a new category, and then become the leading brand within that category. Nvidia, for example. It basically created the category of GPUs, graphical processing units [for video games]. Shopify is a fascinating company; it’s the back office for everyone that wants to compete with Amazon. ServiceNow wants to be the enterprise software company for the 21st century. It started providing IT service management—tracking IT assets and providing help-desk support—and has branched out into customer and human-resources service management. One reseller we spoke with said, “You’re either a ServiceNow customer today, or you will be.”
Thanks Steve.
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>>> Which industries are least hurt by COVID-19?
COVID-19 isn't affecting all industries in the same way.
Fidelity Insights
07/15/2020
https://www.fidelity.com/learning-center/trading-investing/sammy-simnegar-covid
We shouldn't think of how COVID-19 is affecting the stock market in monolithic terms because the opportunities and risks are very different at the company level, says Sammy Simnegar, portfolio manager of Fidelity® Magellan® Fund (FMAGX).
No company is entirely immune from an economic slowdown, Simnegar says.
However, he believes Microsoft (MSFT)—the fund's largest position at the end of May—is resilient. Microsoft has 2 main businesses—its Office software suite and its Azure cloud-services operation. Because Office and Azure help customers to be more productive and competitive, he believes spending on these products is not likely to be hurt much by an economic slowdown.
Amazon (AMZN)—his No. 3 holding—is another name he thinks could continue to take market share during this uncertain time. The company's logistical advantages allow it to ship essential items to Amazon Prime customers with same-day shipping, Simnegar says, noting that few companies can replicate Amazon.com's breadth of selection and speed of delivery.
Large media and entertainment holdings in the fund as of the end of May included Facebook (FB) and Google-parent company Alphabet (GOOG). Simnegar believes usage of these services has increased among many customers since they started sheltering at home due to COVID-19.
Other top holdings included credit card companies Visa (V) and MasterCard (MA), as well as Home Depot (HD). The first two continued to ride the strong secular trend toward electronic payments, while Home Depot has benefited from customers who have spent more time in their homes and, therefore, have dedicated more money toward home improvement.
In comparison, movie theaters, catering businesses, and sit-down restaurants have been hit very hard, Simnegar says, adding that he thinks it will take time for many people to feel comfortable attending social functions and going into theaters, even after social distancing rules are lifted.
Similarly, there could be a semi-permanent shift toward less business travel that could last several years, he says, largely due to the success of companies that have been forced to use videoconferencing in place of in-person meetings since mid-March.
"This is the kind of analysis I've been running through with our research team, as we try to identify the potential 'winners' and 'losers' in a post-pandemic world," Simnegar says.
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>>> Global water crisis: Investing in water
Investing in sustainable water may help investors as well as the planet.
FIDELITY VIEWPOINTS
07/31/2020
Key takeaways
The world is facing critical water shortages, a situation that is likely to get worse with a booming global population and climate change.
The goal of providing safe, clean water for people and agriculture is critical to the planet—and one that many companies are working on.
Water treatment, smart infrastructure, and efficient delivery are key areas where companies are working to provide solutions.
The water on the planet now is the same water that dinosaurs were drinking—and it's the only water that will ever be here.
Oceans account for 97% of Earth's water. Most, 2.5%, of the planet's fresh water, is locked in the polar ice caps, in the soil, or irreversibly polluted. That means, as of now, 0.5% of all the water on the planet is potentially usable by people, animals, and plants.
Innovative solutions to water scarcity
Portfolio manager Janet Glazer discusses investing in companies creating innovative responses to global water scarcity.
"The global water supply is finite and there is no new water," says Janet Glazer, portfolio manager for the Fidelity® Water Sustainability Fund (FLOWX). The fund invests in companies that are helping drive greater efficiency, extending the lifecycle, improving infrastructure, and developing disruptive technologies.
Viewpoints caught up with Glazer to talk about the potential investment opportunities in water and why doing good for the planet can be good for investors.
What are the trends driving the increasing need for water sustainability?
I think we're at a tipping point when it comes to global water scarcity. The 3 main problems exacerbating the crisis of water scarcity include the lack of sufficient infrastructure, a booming population, and climate change. These factors are going to put an enormous strain on an already fragile water system.
The world's population is expected to increase by 2 billion over the next 30 years to almost 10 billion. People are already dying from lack of clean water and sanitation and the situation is expected to get worse.
One in 3 people (2.2 billion) lack access to safe, readily available water.1
Six in 10 lack safely managed sanitation.2
2 million people, mostly children, die every single year either from lack of water or from disease they got from tainted drinking water.3
2.7 billion people live without access to fresh water at least 1 month per year.4
The good news is that there has been some progress. Since 2000, 1.8 billion people have gained access to drinking water services and 2.1 billion have gotten access to basic sanitation services.5
But severe climate issues are exacerbating the risk. Because of this, we're seeing increasing demands from governments around the world asking for help—in particular, help from private companies. That's because there's an immediate need to address the health and safety of global populations while public budgets and spending are under pressure.
Are there any specific companies and industries that you think stand to benefit? And why?
Neptune Technology is a business inside of Roper Technologies (ROP). They are a leader in the smart water metering space and serve more than 4,000 water utilities across North America.
Water meters are remarkably complex and there has been a migration from manually reading meters to automatically reading meters. AMI (Advanced Metering Infrastructure) involves digital meters that have 2-way communication so utilities can communicate with consumers to help them save energy and reduce costs. A smart water network can even help find leaks or tampering.
This is a big opportunity as there are only a handful of big players that dominate. In fact, 40% of the space has yet to be penetrated. So the growth runway is there.
What are companies doing to help solve the water scarcity problem? What more can they do?
There are so many different companies globally helping to combat the water-scarcity crisis—from a variety of sectors too. They are developing new treatment technologies, smart water networks, desalination systems, non-revenue water products, metering solutions, outsourcing systems, and testing equipment.
Water treatment involves the treatment of water and wastewater through its life cycle to remove harmful contaminants and the buildup of harmful deposits.
Evoqua (AQUA) is an example of a company that may benefit from the need to remove chemicals including PFAS (aka "forever chemicals") from our water. They have a full suite of technologies such as reverse osmosis, ion exchange, granular active carbon, and oxidation processes. This is a growing pipeline of opportunity for them with heightened awareness from government.
In terms of smart software and digital applications, Danaher (DHR) is one example. It owns Hach, which produces the Claros water software platform that provides water intelligence for customers to help with regulatory compliance, cost savings, and equipment maintenance. Their system enables customers to collect, access and share data, as well as remotely manage treatment processes efficiently in real time, 24/7. The last example has to do with smart infrastructure. Due to insufficient and old infrastructure, about 30%– 40% of water worldwide becomes non-revenue water according to the International Energy Agency. Non-revenue water is water that is lost due to leaks in the pipes, unauthorized use, corruption, or inefficiencies. This is where a SmartBallTM technology from a company called Xylem (XYL) comes in.
In 2015, Rand Water, the largest water utility in Africa embarked on its largest pipeline condition assessment investigation, examining a little over 2,200 kilometers of Rand's high pressurized pipeline network. They used Xylem's SmartBallTM, which is a multi-sensor tool used to detect and locate the acoustic signatures related to leaks and gas pockets. It helped find a solution to a costly problem that was impacting Africa's largest water utility.
What does this mean in terms of growth and profitability?
It's estimated that industry revenue could grow 4%–6% per year for a long time and, I think, companies that are able to innovate and provide new science, technology, and intelligence-enabled solutions will grow by multiples of that rate.
It encompasses a global and diverse set of businesses. I think quality companies with strong management teams working on the high end of the water technology curve are set to dominate with stronger growth, margins, and valuations over time.
What do you look for in a company you're considering for the fund?
There are a lot of things I think about when considering what to own in the fund but I think there are 4 main elements I focus on.
Capital allocation. I look at how well the company generates free cash flow and how well it has allocated capital throughout its history.
Management strength and company processes, values, and culture. I'm aiming to find businesses where there is a very disciplined approach with a lot of autonomy to enable nimbleness.
Industry dynamics and types of businesses the companies play in. In particular, I think about how wide moats are, how commoditized the businesses are, how durable the growth is, how much capital is needed to grow, how do they compete and segment their markets—and how all of this has resulted in a strong financial model.
Innovation and how they think about existing competencies versus disrupting new norms. And are they being surgical in the areas they go after vs. a holistic "build it and they will come" mentality.
Are there any specific risks associated with investments in water sustainability?
While the secular theme of water scarcity is powerful, the companies do have cyclicality by virtue of the end markets they are exposed to as well as geographies and regions where they have a presence. I try to minimize those risks in the fund with deep, fundamental research.
What is your outlook for the water industry and its quest to help solve the world's water challenges?
I have a very positive outlook for the water industry as it relates to growth of innovation and new technologies that will aid in solving some of our biggest water challenges like water scarcity, resilience, and affordability.
I think Americans tend to focus on the US but when you expand the aperture to the globe, in countries like India or China, where water is a top priority, you see the government commitments to investing in both operating and capital expenditures.
That being said, my optimism is grounded in a very realistic view on the global crisis that is in front of us today, making the call to action more important now than it ever has been.
Fidelity® Water Sustainability Fund: Top 10 holdings
DANAHER CORP (DHR)
IDEX CORPORATION (IEX)
HALMA PLC
ROPER TECHNOLOGIES INC (ROP)
AMERICAN WATER WORKS CO (AWK)
PENTAIR PLC
ROCKWELL AUTOMATION (ROK)
XYLEM INC (XYL)
EVOQUA WATER TECHNOLOGIES (AQUA)
REXNORD CORP (RXN)
As of June 30, 2020. Any holdings, asset allocation, diversification breakdowns or other composition data shown are as of the date indicated and are subject to change at any time. They may not be representative of the fund's current or future investments. The Top 10 holdings do not include money market instruments or futures contracts, if any. Depository receipts are normally combined with the underlying security. Some breakdowns may be intentionally limited to a particular asset class or other subset of the fund's entire portfolio, particularly in multi-asset class funds where the attributes of the equity and fixed income portions are different.
Janet Glazer is a sector leader and portfolio manager in the Equity division at Fidelity Investments. In this role, Ms. Glazer is the global cyclicals sector leader and portfolio manager on the Select Industrials Portfolio, Fidelity Advisor Industrials Fund, and the VIP Industrials Portfolio. She is also responsible for the coverage of multi-industrial companies within the industrials sector.
Prior to assuming her current responsibilities, Ms. Glazer worked as a research analyst at Pyramis Global Advisors, a Fidelity Investments Company. In this capacity, she was responsible for equity research coverage of US and Latin American industrials, including conglomerates, multi-industry, aerospace and defense, machinery, building products, transports, professional services, engineering and construction, transportation logistics, and transportation infrastructure. Previously, Ms. Glazer analyzed the global energy sector, researching alternative energy, refining, and coal equities. She joined Fidelity as a research analyst intern, covering Asian technology, at Pyramis in 2010. Before joining Fidelity, Ms. Glazer was a senior manager at E*TRADE Financial, where she was in charge of global trading and portfolios. Ms. Glazer earned her bachelor of science degree in humanities, with a focus on behavioral economics, from the Massachusetts Institute of Technology (MIT) and her master of business administration degree from MIT's Sloan School of Management.
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>>> Investing in automation in a changing world
Growth in automation is being driven by many factors, including social distancing.
FIDELITY VIEWPOINTS
06/11/2020
Key takeaways
As hardware and software become increasingly advanced, machines are able to work alongside humans or complete complex, intricate tasks.
Other trends that may increase the push toward automation include a growing middle class in developing countries as well as health and safety concerns for workers.
Automation as an investable idea isn't just about robots, though they are a part of it. Companies that make software, cameras, sensors, and semiconductors all offer ways for investors to find opportunities.
Automation is transforming many aspects of our lives. It's used to assemble smartphones, grab boxes in a warehouse, assist surgeons through operations, skim vast amounts of data, even drive your car. And that's creating opportunities for investors.
"Automation is an exciting global theme that our research analysts are watching across regions and across sectors," says William Shanley, Managing Director of Research and co-portfolio manager of the Fidelity Disruptive Automation Fund (FBOTX).
What is automation?
Automation uses machines or electronics to complete a task—with or without a human involved. Some of the primary components related to automation are robotics, artificial intelligence, semiconductors and electronics, as well as machine vision and sensors.
The field of automation is already big but growing fast
The automation trend is big, broad, and fast-growing. In the field of factory automation alone, the total addressable market globally was about $160 billion in 2018.1 And that's expected to grow at a high single-digit compound annual growth rate (CAGR) through the next 5 to 10 years.
What's driving the growth in factory automation? Here are 6 tailwinds:
1. Products are more complex.
Electronic devices, like smartphones, have become increasingly intricate. Using machines in the manufacturing process can be more efficient than humans alone.
For example, the metal casings of many smartphones are milled by a machine called the Robodrill.
2. As the middle class grows in developing countries, wages are rising.
Wages in many areas of Asia have risen steeply in recent years, particularly in Southeast Asia.2 As wages increased in China, manufacturing gradually shifted to countries such as Vietnam, Laos, and Cambodia, where wages are lower—but growing quickly. In order to control costs, manufacturers have a strong incentive to automate.
3. Health and safety concerns for human workers are being recognized.
Automation can help to increase worker safety. Plus, people have physical needs that machines may not need, including the need for climate control, adequate ventilation, and lighting.
4. "Co-bots" (collaborative robots) are evolving.
Robots have historically not been able to work alongside humans—due to safety issues—but that has changed over the past decade.
Co-bots are robots that don't require protective fencing, and they can work together with humans to do a given task. For example, on the auto factory floor, a co-bot can lift a heavy tire and move it to the body of the car. The final steps of making sure the tire is in place can be done by a human. Many tasks that were previously done by humans alone can now be done in conjunction with robots, increasing efficiency and safety.
5. Peak robot density is far away for most countries.
Robots per manufacturing worker are still very low in many countries, which means that the growth runway for robots is long. Robot volumes have grown at close to a 20% compound annual growth rate (CAGR) over the past decade, and we could see strong growth for many years to come.
Robot density in the manufacturing industry (2018)
Density is robots per 10,000 manufacturing workers. Source: International Federation of Robotics.
6. Social distancing may be a tailwind for some areas of automation.
With more people working from home, laptops, tablets, and smartphones may see increased demand. That can mean more semiconductor chips and data centers. "All of that is positive for automation," says Tak Nishikawa, a research analyst with Fidelity Investments.
What are the risks?
While automation benefits from strong secular tailwinds, it is also cyclical. When manufacturing companies feel comfortable expanding, they may invest in machines, like robots. So the robotics industry is tied to the capital expenditures (CAPEX) of businesses, which rise and fall with the business cycle.
"If you invest in automation stocks at the peak of a CAPEX cycle, then for a period of time your returns may not be good. But over the long term, the category has tended to outperform—just because of the secular dynamics around automation," Nishikawa says.
Where are the opportunities?
Robots are everywhere—assembling furniture, polishing smartphones, and assembling battery packs for electric vehicles.
Within this broad category there are high barriers to entry. The leading companies have wide moats, which may help them stay competitive in this growing field.
There are many companies in the automation space, including Japanese companies like Keyence (KYCCF), and SMC (SMCAY). There are also some in Europe, like Siemens (SIEGY) and ABB (ABB). And there are companies in the US, including Rockwell Automation (ROK) and Parker Hannifin (PH)
The potential uptick in online shopping is positive for what are known as warehouse automators. This category includes companies like Daifuku (DFKCY) in Japan, and Dematic, owned by Kion (KIGRY) in Europe. Amazon has its own warehouse automation company, Amazon Robotics (formerly Kiva before being acquired), making and installing robots for Amazon's warehouse floor.
Software is another critical component of automation. "Google has been a leader in AI and their technologies are likely to be very important in automation. But the universe is quite big, so there are lots of great companies within the space to invest in," says Nishikawa.
Another area to watch is machine vision and sensors. Machine vision is using cameras and software to achieve an outcome—for instance, detecting defects or quality control. One of the global leaders in machine vision is Keyence (KYCCF_, who competes with US-based Cognex (CGNX) in this area. "Machine vision is one of the fastest growing product categories within automation," Nishikawa says.
Companies that make robots may also be positioned for growth over the long term. Fanuc (FANUY) is a global leader in this area, controlling more than a quarter of the world market share. "It's an area that has grown at 20% CAGR over the last decade," says Nishikawa.
Global robot demand
It's estimated that global demand for robots will exceed 500,000 units by 2021. Global demand was just over 100,000 in 2008.
Source: International Federation of Robotics as of 2018.
How to invest
Finding individual companies that will outperform in a complex and dynamic global environment requires deep research spanning many regions. Since the automation theme is global in nature and cuts across traditional sectors and industries, investors may want to consider a thematic fund to invest in this trend. Fidelity's Disruptive Automation Fund (FBOTX) is one example, investing in companies related to automation around the world and across many sectors, including areas such as industrial robotics, artificial intelligence, and autonomous driving. With the ability to look for opportunities everywhere, the fund tries to spot disruptive automation companies wherever they may be.
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>>> Thematic ETFs The New Sectors?
ETF.com ETF.com
June 8, 2020
https://finance.yahoo.com/news/thematic-etfs-sectors-080000524.html
At an industry virtual happy hour recently, an intriguing idea came up: Thematic investing is the realm of entrepreneurial thinking, whereas traditional sector investing is a construct of index providers, and ill-fitted for today’s economy.
Not my idea, for sure. But clever! And it sparked a really interesting debate I’ve come across before when trying to make sense of segments in the ETF space.
For example: the idea that Visa and Mastercard are technology companies but financials, too; the idea that Facebook and Netflix are seen as tech by many investors, but classified as communication services by the Global Industry Classification Standard (GICS); the idea that Amazon is, well, a little bit of just about everything, but pegged only into the consumer discretionary sector.
Tech Curveball
This conversation seems to center on the “technologization” of so many parts of our economy. On the surface, one of the main issues is the cross-pollination of technology into so many other sectors.
In its simplest form, thematic investing is helping us address the massive disruption technology has caused on businesses across industries—a disruption that often challenges our sector view of the world, and falls outside the confines of our traditional low-cost beta sector allocation.
The question is, are today’s themes really our new and improved sectors?
There’s great research and quant work done on this that’s certainly worth digging into. But the happy-hour chat brought to mind the lineup of thematic ETFs from Global X, a firm that’s put a lot of work into developing this space, and offers a great example of the potential that themes have to disrupt traditional sector investing.
How-We-Live Sectors
The Global X Cloud Computing ETF (CLOU), for example, is a technology sector ETF. The fund’s focus is on cloud computing, as in software as a service, platforms, data storage and so on. Maybe it’s a niche within technology, but the flip side is, what line of business—in any sector—doesn’t rely on cloud computing today? Can you really separate the two?
The Global X FinTech ETF (FINX) is a financials/technology ETF. The Global X Genomics & Biotechnology ETF (GNOM) is a health care/technology ETF. The list goes on.
If you go a step further into this thematic versus traditional sector conversation, past the obvious technology implication on all things, you could argue that thematic ETFs are allowing us to invest in sectors as defined by how we live our day-to-day lives.
For example, look at the Global X Health & Wellness Thematic ETF (BFIT). This ETF could be considered a “health care” fund for those who view health as a holistic approach involving many things beyond pharmaceuticals and doctors.
BFIT invests in companies that make money from the business of good physical health. The approach here is to capture trends within a changing health care landscape, so the fund invests in companies involved with nutrition, weight loss, even fitness equipment.
If this were a traditional sector ETF, BFIT would probably be closer to a consumer discretionary fund than anything resembling health. Top holdings here are Lululemon, Herbalife and Planet Fitness. But the story is compelling if you believe health care is more than drugs and hospitals.
Perhaps one the cleverest examples of capturing the challenge traditional sector investing faces in an evolving economy is the Global X Internet of Things ETF (SNSR).
SNSR is a hybrid of sectors, mixing consumer discretionary, health, tech and energy in a portfolio that, if it were a single sector ETF, it would have to be a “lifestyle sector” ETF.
SNSR offers access to companies that enable all things to be network connected—think wearable tech, home automation, smart locks, smart energy control, smart devices, connected automotive tech and so on.
Hurdles & Possibilities
It’s hard to imagine a day when traditional sectors and the Sector SPDRs vacate their dominance and their liquidity empire. Chances are, not in this lifetime. If for no other reason, simply because in the world of ETFs, liquidity is key, and achieving that kind of liquidity is almost unimaginable in the realm of thematic ETFs.
Today theme investing remains more of a satellite idea, complementing a core anchored in the tried-and-true sector and asset allocation.
And no doubt, thematic ETFs sometimes do seem gimmicky, often perceived as fads or marketing ploys without a long-standing role in a portfolio. Sometimes they are just that.
Just about every year, we have one or two thematic ETFs capture everyone’s imagination and become the talk of the town, chased by headlines and retail money looking for a short-term investing opportunity. These hot-flash-in-the-pan funds fizzle out just as fast as they sizzled, perpetuating the view that thematic investing is plagued by noise.
But it’s fun to think about the possibility of doing things differently. This conversation about themes offering a different—maybe better—mousetrap than traditional sectors for a world, an economy, companies that are more and more interconnected is really interesting.
Thematic investing is compelling because themes tell interesting stories about the way we live and the way we can invest accordingly. Successful thematic ETFs do this well—tell a good story.
Whether themes will eventually disrupt traditional sector investing and redesign what a core equity allocation looks like, who knows. But it’s a compelling storyline, and who doesn’t like that?
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>>> 9 High-Flying ETFs of 2019
Zacks
Sweta Killa
November 8, 2019
https://finance.yahoo.com/news/9-high-flying-etfs-2019-160004841.html
Since the start of the fourth quarter, Wall Street is witnessing new highs on the back of a better-than-expected earnings season, easing policies and trade deal optimism.
Total earnings for 403 S&P members that reported Q3 results are down 1.7% on 4% higher revenues, with 73% beating EPS estimates and 58.1% beating on revenues. While earnings growth is less than what this group of companies witnessed in recent periods, revenue growth is only modestly tracking lower. The proportion of these companies beating EPS and revenue estimates is in the historical range.
Major central banks across the globe are taking steps to prop up slowing economic growth that have eased global recession concerns and in turn lifted investors’ confidence. The Fed has slashed interest rates three times so far this year and the European Central Bank also cut interest rates in a package of easing measures (read: Value ETFs Trumping Momentum ETFs: Here's Why).
In the latest trade development, the United States agreed to remove tariffs in phases and Beijing is also considering removing restrictions on poultry imports. Per Bloomberg News, the first agreement between the superpowers will be signed in the next few weeks.
While there have been winners in many corners of the space, we highlight nine ETFs from different zones that have outperformed so far this year. These are expected to continue outperforming, provided the fundamentals remain intact.
SPDR S&P Semiconductor ETF XSD – Up 52.7%
This ETF, which offers exposure to the semiconductor corner of the broad tech sector, has emerged as an undisputed winner this year on trade deal optimism. It tracks the S&P Semiconductor Select Industry Index, holding 35 stocks in its portfolio. The fund has AUM of $407.4 million and charges 35 bps in fees per year. It trades in average daily volume of 116,000 shares and has a Zacks ETF Rank #2 (Buy) with a High risk outlook (read: S&P 500 at Record High: 6 ETF Winners of Last Week).
Invesco Solar ETF TAN – Up 49.9%
This ETF, which offers global exposure to 22 solar stocks, has been rising on strong solar installation, a rebound in global solar demand, California’s push to make solar panels and competitive pricing. American firms dominate the fund’s portfolio with nearly 44.5% share, followed by China (25.7%) and Germany (9.1%). The product has amassed $408.9 million in its asset base and trades in average daily volume of 240,000 shares. It charges investors 70 bps in fees per year and has a Zacks ETF Rank #2 with a High risk outlook.
iShares U.S. Home Construction ETF ITB - Up 46.1%
The U.S. homebuilding market has been buoyant on lower mortgage rates and decelerating home price growth, which have encouraged people to buy more homes. ITB provides exposure to U.S. companies that manufacture residential homes by tracking the Dow Jones U.S. Select Home Construction Index. With AUM of $1.2 billion, it holds a basket of 45 stocks and charges 42 bps in annual fees. It trades in a hefty volume of around 2.1 million shares per day on average and has a Zacks ETF Rank #3 (Hold) with a High risk outlook (read: Why Homebuilder ETFs Are Rising).
Invesco WilderHill Clean Energy ETF PBW – Up 42.3%
This product, powered by a solar surge, provides exposure to 40 U.S. companies engaged in the business of advancement of cleaner energy and conservation. It has AUM of $183.4 million and expense ratio of 0.70%. The ETF trades in average daily volume of 30,000 shares.
Global X Internet of Things ETF SNSR – Up 40.6%
This fund follows the Indxx Global Internet of Things Thematic Index and provides exposure to companies that stand to benefit from the broader adoption of IoT. Holding 51 stocks, it has accumulated $109.6 million in AUM and sees average daily volume of around 26,000 shares. Expense ratio comes in at 0.68%.
The Defiance Quantum ETF QTUM – Up 40.1%
This ETF offers investors liquid, transparent and low-cost access to companies developing and applying Quantum Computing and other transformative computing technologies. It follows the BlueStar Quantum Computing and Machine Learning Index (BQTUM), which measures the performance of approximately 60 globally-listed stocks across all market capitalizations. QTUM has expense ratio of 0.40% and trades in average daily volume of 2,000 shares. It has accumulated $8.3 million in its asset base (read: Play This ETF & Dump Stocks Unfit for Technological Disruption).
Invesco Aerospace & Defense ETF PPA — Up 39.4%
It offers exposure to 48 companies involved in the development, manufacturing, operations and support of US defense, homeland security and aerospace operations. It tracks the SPADE Defense Index, charging 59 bps in annual fees from investors. The fund has so far managed assets of $1.1 billion and trades in average daily volume of 76,000 shares. It has a Zacks ETF Rank #2 with a Medium risk outlook.
SPDR S&P Kensho Final Frontiers ETF ROKT – Up 36.2%
This ETF follows the S&P Kensho Final Frontiers Index, which utilizes AI and a quantitative weighting methodology to capture companies, which offer products and services that are driving innovation behind the exploration of the final frontiers, including the areas of outer space and the deep sea. It holds a basket of 27 stocks and charges 45 bps in annual fees. The product has accumulated AUM of $4.6 million and trades in volume of 1,000 shares a day on average. It has a Zacks ETF Rank #2 (read: Space ETFs: Explore the Final Frontier).
U.S. Global GO GOLD and Precious Metal Miners ETF GOAU: Up 35.8%
This fund provides investors with access to companies engaged in the production of precious metals either through active (mining or production) or passive (owning royalties or production streams) means. It tracks the U.S. Global Go Gold and Precious Metal Miners Index, holding 29 stocks in its basket. Canada takes the lion’s share at 59.4%, followed by the United States (13.4%) and Australia (11.6%). It has amassed $36.4 million in its asset base and charges 60 bps in fees per year. Volume is light at nearly 49,000 shares.
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>>> Factor In This Fabulous 5G Fund For 2020
ETF Trends
February 14, 2020
https://finance.yahoo.com/news/factor-fabulous-5g-fund-2020-155224123.html
As this year moves along, investors will undoubtedly hear more about the 5G rollout, a theme that can be tapped with ETFs, such as the Defiance 5G Next Gen Connectivity ETF (FIVG).
The Defiance Next Gen Connectivity ETF is the first ETF to emphasize securities whose products and services are predominantly tied to the development of 5G networking and communication technologies. FIVG does this by tracking the BlueStar 5G Communications Index, and FIVG attempts to invest all, or substantially all, of its assets in the component securities that make up the Index.
The 5G rollout is expected to be massive and present investors with significant opportunities.
5G means quicker downloads, much lower lag and a significant impact on how we live, work and play,” according to Verizon. “The connectivity benefits of 5G are expected to make businesses more efficient and give consumers access to more information faster than ever before.”
Fantastic FIVG
5G technology will use a higher frequency band versus the current 4G technology standard, resulting in faster transmission of data. Being able to transmit copious amounts of data at a faster rate is certainly of benefit for wireless companies and their users, but 5G could be a major disruptor in various industries.
FIVG “isn’t just a success story among 5G ETFs. It’s confirmation that some thematic funds can captivate investors. A few weeks ago, FIVG vaulted to $200 million and now has over $235 million in assets,” reports InvestorPlace.
The possible applications of 5G technologies are only in the exploration stages, and the possibility of returns is uncertain and may not be realized soon. Nonetheless, it presents an opportunity that could see early adopters reap the benefits, especially if the technology is utilized to its fullest capabilities. Pivotal to the FIVG thesis is the fund's broad reach.
The fund features exposure to core carrier-grade networking equipment including cellular antennas and routers, mobile network operators, satellite-based communications, enhanced mobile broadband chips, new radio technology, wireless network test and optimization equipment, cloud computing equipment, software-defined networking or network functions virtualization, fiber optic cables, or cell tower and/or data center real estate investment trusts.
“FIVG’s deep bench is important because the 5G ETF allocates about 10% of its combined weight to Nokia (NYSE: NOK ) and Ericsson (NASDAQ: ERIC) . These are both credible 5G plays, but also two of the theme’s most obvious laggards,” according to InvestorPlace.
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Wind Energy - >>> Ohio Approved the Country's First Freshwater Offshore Wind Farm
Gizmodo
by Dharna Noor
5/22/20
https://earther.gizmodo.com/ohio-approved-the-countrys-first-freshwater-offshore-wi-1843608282
Ohio legislators have approved plans to build North America’s first-ever freshwater offshore wind farm. On Thursday, the Ohio Power Siting Board unanimously approved the Icebreaker wind project, a six turbine project slated to be constructed off the Lake Erie shore near downtown Cleveland. The wind farm would include a 12-mile long submerged cable to transmit the electricity generated by the wind turbines to Cleveland power substation.
If constructed, the Icebreaker farm would be unique. There are only five freshwater offshore wind farms in the world, owing to the challenges posed by winter ice that’s not an issue in saltwater-based offshore wind farms. The new turbines—which could generate 20.7 megawatts of energy or enough to power 7,000 homes—will have to withstand the force of ice sheets that form on the Great Lakes each winter and can get pushed around by strong winds.
After years of developers considering different methods, the Icebreaker farm settled on a design with large inverted cones on the towers at the water level that would push the ice down and away from the turbines. If the technology works, it could be used at other freshwater wind farms.
“The work that has gone into ensuring this project can safely operate in a freshwater setting opens up new possibilities for clean energy moving forward,” Miranda Leppla, vice president of energy policy for the Ohio Environmental Council, told Earther in an email. “This particular demonstration project will help us not only achieve cleaner air and healthier communities, but it will also put Ohio on the map as a leader in renewable energy technologies as this project.”
That would be a huge boost in the U.S., which has lagged in offshore wind development to-date. While Europe has 105 offshore wind farms, the U.S. currently has only one up and running. But according to the U.S. Department of Energy, Americans shores have enough wind blowing to produce more than 2,000 gigawatts of power, or nearly double the nation’s current electricity use. Freshwater wind is a small but important piece of that puzzle.
First, however, the wind project will have to be built. And the developers of the project, a public-private partnership called Lake Eerie Development Corporation, aren’t convinced that can happen under the rules the siting board approved. According to the order, for nine months out of the year, the project must completely stop the turbines from rotating during nighttime hours to protect birds and bats that live in the area.
The developers and project supporters, including the Ohio Environmental Council, the local chapter of the Sierra Club, and the Audubon Society, say the limits are unnecessary. If they stay in place, they could essentially prevent the project’s construction by vastly reducing the amount of revenue it can generate.
The wind farm has also faced opposition from Murray Energy, the largest private coal company in the U.S. The company paid nearly $1 million to an anti-renewable energy law firm in Ohio. Two bird conservation groups filed a lawsuit last year to block the project. It’s worth noting that one of those groups, the American Bird Conservancy, has held partnerships with corporations owned by fossil fuel magnates the Koch Brothers. It also has a history of opposition to renewables despite research which shows the climate crisis threatens most American breeding bird species.
Fishy bird conservation groups and vested interests aside, the project could be a game changer for Ohio if it succeeds. Currently, the state derives a bit more than 2 percent of its energy from renewables, the lowest percentage of any state besides Delaware.
Getting there will be a challenge. The ruling on the Icebreaker farm is just the latest in a series of hurdles to boosting renewables from state officials. Last year, the siting board adopted strict rules for new wind projects that are currently on appeal before the Ohio Supreme Court. And earlier this month, a watchdog group found that the major utility Dominion Energy was pushing officials to turn down a clean energy bill.
Despite government rulings, there’s support for a clean energy transition among both liberals and conservatives across the state. A 2019 poll shows that 84 percent of Ohio conservatives want at least a quarter of their state’s energy to come from renewables. If built, the wind project could help get it there.
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Quantum Computing - >>> “QTUM” ETF Capitalizes on the Field of Quantum Computing
ETF Trends
by BEN HERNANDEZ
NOVEMBER 25, 2019
https://www.etftrends.com/innovative-etfs-channel/qtum-etf-capitalizes-on-the-field-of-quantum-computing/
Disruption like artificial intelligence and robotics are in the forefront of technological advances, but other areas like quantum computing are powering the next generation of ETFs like the Defiance Quantum ETF (NYSEArca: QTUM).
Defiance ETFs notes multiple breakthroughs in the field of quantum computing.
“We have seen increased institutional interest in QTUM, given the recent announcement of Google reaching quantum supremacy,” says Chief Executive Officer Matthew Bielski.
QTUM tracks a rules-based index, known as the BlueStar Quantum Computing and Machine Learning Index, that gives investors exposure to the next generation of computing, including disruptive companies building out quantum computing and machine learning technology. The index is comprised of equity securities of leading global companies engaged in the research and development or commercialization of systems and materials used in quantum computing.
Areas within quantum computing include advanced traditional computing hardware, high powered computing data connectivity solutions and cooling systems, and companies that specialize in the perception, collection and management of heterogeneous big data used in machine learning. Additionally, iIndex components are assigned an equal weight subject to a liquidity overlay, index components are reviewed semi-annually for eligibility, and the weights are reset accordingly.
QTUM is part of an ETF family that also includes FIVG, the First 5G ETF; and DIET, focused on next gen food and sustainability.
Fund facts:
Quantum computers use principles of quantum mechanics to perform significantly more complex computations, and at exponentially faster speeds, than conventional computers.
Quantum Computing is set to fundamentally enhance Machine Learning, a subset of artificial intelligence, which gives computers the ability to “learn” with data, without being explicitly programmed.
Benefits of QTUM:
QTUM offers investors liquid, transparent and low-cost* access to companies developing and applying Quantum Computing and other transformative computing technologies.
The underlying index, BlueStar Quantum Computing and Machine Learning Index (BQTUM), tracks approximately 60 globally-listed stocks across all market capitalizations.
Equal weight methodology offers investors more precise exposure, including to smaller companies with more potential for growth.
In the business world, it’s adapt or die and the wave of disruption occurring in all sectors is weeding out companies that will be slow or resistant to innovation. This presents an opportunity for the discerning investor by capitalizing on companies that can’t keep up with the changing times.
Disruption isn’t relegated to startup companies taking an idea and simply building its core business model around it. It also affects existing companies whose outdated business models can no longer stem the tide of disruptive forces on revenue generation.
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>>> With 5G Rollout Looming, This ETF Swells in Size
ETF Trends
January 28, 2020
https://finance.yahoo.com/news/5g-rollout-looming-etf-swells-161946346.html
This will be the year of the highly anticipated 5G wireless system rollout around the world and data suggest investors are preparing for that with the Defiance 5G Next Gen Connectivity ETF (FIVG) .
The Defiance Next Gen Connectivity ETF is the first ETF to emphasize securities whose products and services are predominantly tied to the development of 5G networking and communication technologies. FIVG does this by tracking the BlueStar 5G Communications Index, and FIVG attempts to invest all, or substantially all, of its assets in the component securities that make up the Index.
FIVG “surpassed $200M in less than 12 months of launch, making it one of the most successful thematic ETF launches in recent years,” according to a statement from New York-based Defiance ETFs.
5G technology will use a higher frequency band versus the current 4G technology standard, resulting in faster transmission of data. Being able to transmit copious amounts of data at a faster rate is certainly of benefit for wireless companies and their users, but 5G could be a major disruptor in various industries.
Give A High FIVG
FIVG offers investors liquid, transparent and low-cost access to companies engaged in the research & development or commercialization of systems and materials used in 5G communications. The underlying BlueStarGlobal 5G Communications Index tracks approximately 60 globally-listed stocks across all market capitalizations, with special weighting given to large caps (71%.) It uses a tiered weighting system that divides upholdings. The ETF has been around since March of 2019 and has an expense ratio of 0.30%.
The BlueStar 5G Communications Index is a rules-based index that tracks the performance of a group of US-listed stocks, of global companies that are involved in the development of or are otherwise instrumental in the rollout of 5G networks. These securities are part of the following categories: core carrier-grade networking equipment including cellular antennas and routers, mobile network operators, satellite-based communications, enhanced mobile broadband chips, new radio technology, wireless network test and optimization equipment, cloud computing equipment, software-defined networking or network functions virtualization, fiber optic cables, or cell tower and/or data center real estate investment trusts.
The possible applications of 5G technologies are only in the exploration stages, and the possibility of returns is uncertain and may not be realized soon. Nonetheless, it presents an opportunity that could see early adopters reap the benefits, especially if the technology is utilized to its fullest capabilities.
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>>> Cloud Computing ETF (CLOU) Hits New 52-Week High
Zacks
by Sweta Killa
June 1, 2020
https://finance.yahoo.com/news/cloud-computing-etf-clou-hits-134001763.html
Cloud Computing ETF (CLOU) Hits New 52-Week High
For investors seeking momentum, Global X Cloud Computing ETF CLOU is probably on radar. The fund just hit a 52-week high and is up 61.4% from its 52-week low price of $12.36/share.
But are more gains in store for this ETF? Let’s take a quick look at the fund and the near-term outlook on it to get a better idea on where it might be headed:
CLOU in Focus
This fund seeks to invest in companies positioned to benefit from the increased adoption of cloud computing technology, including companies whose principal business is in offering computing Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), managed server storage space and data center real estate investment trusts, and cloud and edge computing infrastructure and hardware. CLOU charges 68 bps in annual fees (see: all the Technology ETFs here).
Why the Move?
The cloud computing corner of the broad stock market has been an area to watch lately, given rising demand. The area is growing exponentially buoyed by stay-at-home orders that have boosted demand for work and entertainment from home. Even if the economy reopens, the trend is likely to continue given the change in consumer behavior. Cloud computing has encouraged video conferencing, gaming, e-commerce, remote project collaboration, online classes and other programs.
More Gains Ahead?
It seems that CLOU might remain strong given a high weighted alpha of 36.2 but could be a risky choice as depicted by 20-day volatility of 30.6%. As a result, there is definitely still some promise for risk-aggressive investors who want to ride on this surging ETF.
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Solar Energy - >>> This Won’t Be U.S. Solar’s Best Year Ever—But It’ll Be Close
While rooftop companies have suffered thanks to Covid-19, home solar arrays are still an attractive option.
Bloomberg
By Brian Eckhouse
June 2, 2020
https://www.bloomberg.com/news/articles/2020-06-02/u-s-solar-set-for-its-third-best-year-ever-despite-coronavirus?srnd=premium
This year was shaping up to be Sunnova Energy International Inc.’s best ever.
California—already the biggest U.S. solar market—had started requiring most new homes to be powered by the sun. The rooftop solar company’s shares hit a new peak in early March, and analysts projected sharp growth. Even bad news hadn’t harmed Sunnova. Rolling blackouts, which big utilities had used the previous fall to help prevent wildfires? Just another reason homeowners might want Sunnova’s solar and battery products. A trade war hadn’t stopped the rise of residential solar. Even the novel coronavirus in China didn’t look like much of a problem. In late February the company increased its estimate for the number of new customers it would bring in for the year.
But Sunnova Chief Executive Officer John Berger arrived in Snowmass, Colo., on March 12 for a ski vacation with his family already sensing that things were changing. Some runs were beginning to close, and his stock was dropping off sharply from its high. “I was thinking that my wife and kids would go skiing the next day, and I would be in the hotel room on the phone,” Berger says.
If only it had been that easy. Berger cut the trip short, returned to company headquarters in Houston, and ordered most employees to stay home. The next few weeks were a blur. Door-to-door sales—a key marketing strategy for the residential sector—had to be mostly sidelined. Daily sales had never been more volatile. Berger suspended salaries for the entire management team, let go of outside consultants, and put off some expansion plans.
“You focus on the short term because the short term is so acute,” he says. “If you can’t handle the short term, you’re not around for the long term.”
No solar executive was supposed to be talking like this, not this year. After a decade of bruising battles with utilities keen to preserve their generations-long monopolies and fallout from high-profile failures, 2020 was supposed to be the industry’s coming-out party. To Joe Osha, an equity analyst at JMP Securities LLC who, coming into this year, forecast as much as 20% growth in American residential installations, the reasons for optimism were simple: the mood in California, mounting investor enthusiasm, and the potential extension of a key federal tax credit.
There was another dimension as well. Whereas most things involving electrical grids are decided by utilities, operators, and governments, rooftop solar is participatory; it’s a personal choice. If climate-sensitive homeowners want to do something to directly help with decarbonization—and show it off—one option is rooftop panels. With all that still in mind, Osha remains optimistic. “There’s no particular reason not to have the same level of positivity once we get through this downturn and the disruptions associated with it,” he says, though he now thinks the residential market will be unchanged at best this year.
Palmetto, a solar and clean energy company based in Charleston, S.C., has seen strong growth during the pandemic, says CEO Chris Kemper. Its customer base surged 40% from January to April.
One thing that’s helped: Palmetto shifted to a gig economy model well before the crisis, Kemper says. Early on the company’s “members,” as they’re known, primarily had sales experience within the solar industry. In March, Palmetto began marketing itself to new recruits. With more and more people out of work, membership has almost doubled from January and now counts schoolteachers, Uber and Lyft drivers, and real estate brokers in its number.
Although equity analysts at Cowen & Co. tracked a 30% to 40% drop in U.S. residential installations in the second quarter, there’s a sense in the market that a rebound may not be too far away. Sunrun Inc. in San Francisco, America’s biggest rooftop company, has begun bringing back furloughed panel installers. BloombergNEF now forecasts 2.6 gigawatts will be deployed in the country in 2020, which, though below last year’s high of 2.8GW, would still be the sector’s third-best annual performance. BNEF has seen demand weaken because of the virus, but the California mandate has helped cushion the blow. It expects installations to reach a new high of 3.2GW next year and 5.8GW in 2022, with government incentives and cost reductions driving the expected surge.
Around the world there are pushes to expand rooftop solar amid the pandemic. South Korea bumped up its subsidy for residential and commercial solar, which BNEF says will likely prompt record-high installations this year. Switzerland, which had a strong first quarter compared with last year but anticipated outbreak-prompted setbacks, will allocate 46 million Swiss francs ($47 million) to support development. Italy’s stimulus package, passed in May, increases the income tax rebate for photovoltaic systems smaller than 20 kilowatts from July 1 of this year through the end of 2021, says Jenny Chase, a solar analyst at BNEF. “These are probably not the last countries to use residential solar to keep people working,” she says.
As for Sunnova, sales volumes increased throughout April and into May from the March nadir. Capital markets have improved, solar loans broadly appear to be performing well, and customers are meeting payment obligations. While the rooftop solar company laid off about 20 people in the early days of the crisis, Berger says he now employs more people than before the pandemic began. Sunnova’s stock is up 47% for the year.
In a tweet on May 13, California Governor Gavin Newsom noted that wildfires in the state had increased 60% this year from 2019. “It’s a tired cliché, but you have to walk and chew gum at the same time,” Newsom said during a visit to a fire station the same day. “We’re focused on coronavirus mitigation and trying to do our best to suppress the spread. At the same time, we’ve got to mitigate and suppress these fires as we move into wildfire season.”
The residential solar industry may actually benefit from this sudden stress test. Many of those door-to-door salespeople are figuring out how to do their job online. Sunrun CEO Lynn Jurich says the pandemic has been a catalyst for other changes—things that might have taken a couple of years got done in a few weeks. And more counties across the country are now allowing inspections to happen virtually. Both will help rooftop installers cut their biggest expense: marketing costs.
It all bodes reasonably well, Berger says: “We’re getting back to the trend line—we’re still showing growth year-over-year. I think we’ll get back to that.”
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>>> Best ETFs of 2020: The Global X Cloud Computing Fund Should Be a Winner
InvestorPlace
by Dana Blankenhorn
March 27, 2020
https://finance.yahoo.com/news/best-etfs-2020-global-x-150442702.html
Dana Blankenhorn’s choice for the contest is the Global X Cloud Computing Fund (NASDAQ:CLOU).
Since the start of 2020, the Global X Cloud Computing Fund (NASDAQ:CLOU) is down by 9%. In a market infected with fear thanks to the coronavirus from China, that counts as a win.
CLOU had been outperforming the S&P 500 during January and February. The divergence has sharpened since things got serious on Feb. 19. Since then, CLOU is down 18%, but the S&P is down 27%.
Is This Still One of the Best ETFs to Consider?
CLOU is designed to track the INDXX USA Cloud Computing Index. This index encompasses companies that are actively involved in the cloud computing industry. Most are applications sold as services.
The largest holding of CLOU is Shopify (NYSE:SHOP), an e-commerce application that was one of the market’s best performers in 2018 and 2019. Over the last three years it rose from less than $70 per share to a recent high of almost $600 before falling back to its present level of $415.
Other big application providers in the index are Netflix (NASDAQ:NFLX), Salesforce (NYSE:CRM) and Twilio (NYSE:TWLO), the latter of which embeds voice, video and text into other applications.
Many CLOU components provide services for other cloud companies. An example is Zscaler (NASDAQ:ZS), a cloud security company whose shares are up 23% so far in 2020. Zscaler has been warning about risks in the “shadow IoT” world, the laptops and phones used by workers at home.
Not everything CLOU touches has turned to gold. Among the losers so far are Paycom Software (NYSE:PAYC), which provides cloud-based human resources applications. Paycom has been hit hard as companies have moved to lay off workers, and the shares are down 20% so far in 2020.
Beyond Applications
CLOU doesn’t just feature cloud application providers.
Akamai Technologies (NASDAQ:AKAM), originally created as a Content Delivery Network in 1998, now offers a host of security and connectivity solutions for carriers. Its software works inside the network, invisible to most users. Its customers include service providers as well as enterprises. Akamai shares are up nearly 3% so far this year.
Another big holding is Digital Realty Trust (NYSE:DLR), a real estate investment trust (REIT) that owns data centers. These are the buildings, filled with computers and networking gear, through which enterprises connect with the cloud and clouds connect to each other. REITs are organized to build with debt and pay income back to shareholders. DLR’s dividend of $4.48 per share last year yielded 3.34%. Since the start of the year, DLR shares are up 13%.
Proofpoint (NASDAQ:PFPT) focuses on protecting e-mail, both the messages themselves and the mailboxes they rest in. This has become the most expensive problem in all of cybercrime, the company says. Since the start of 2020, however, Proofpoint shares are down by 14%, because it has been delaying profits in favor of growth. That’s an approach that is in bad taste right now.
The Bottom Line on CLOU
I had no idea a global pandemic was around the corner when I chose to recommend CLOU late last year.
I was just looking to win the contest. It seemed to me that remote work, and cloud applications, were fated to grow fast. Most CLOU holdings are growth companies, not dividend payers, and that aggressive approach will usually win.
As I wrote at the time, “To win a contest you must be bold.” Even by the end of 2019, the transition to the cloud was only 20% complete, according to International Business Machines (NYSE:IBM).
That puts cloud applications at the center of their growth curve. Such companies have ample pricing power, limited competition and innovative solutions to offer. The way to growth is always on the leading edge.
So, it seems, is the way to safety in a panic.
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>>> Record Spending in Cloud Computing Broke Records in 2019
ETF Trends
February 19, 2020
https://finance.yahoo.com/news/record-spending-cloud-computing-broke-163210127.html
The cloud computing arms race isn’t relegated to the tech giants like Google and Amazon. Organizations around the world are opening up their wallets and spending more on cloud computing technology to fortify their core businesses, resulting in record spending in 2019.
A Techradar report noted that organizations all around the world “spent a record $107bn on cloud computing infrastructure services last year according to a new report from Canalys.
Spending on cloud computing infrastructure services was up by 37 percent compared to the previous year and a third of this year's spending went to Amazon's cloud computing division, AWS.”
"Organizations across all industries, from financial services to healthcare, are transitioning to being technology providers,” said Alastair Edwards, chief analyst at Canalys. “Many are using a combination of multi-clouds and hybrid IT models, recognizing the strengths of each cloud service provider and the different compute operating environments needed for specific types of workloads."
This spending is expected to increase as more companies integrate cloud computing into their existing infrastructures. According to market analysts as Canalys, this type of spending will sustain itself over the next five years with estimates that total spending on cloud infrastructure services could hit $284bn in 2024.
Cloud computing
The impact of cloud computing can be felt as more companies are utilizing the technology at a rapid pace to power their core businesses. That’s why Global X ETFs, the New York-based provider of exchange-traded funds, recently launched the Global X Cloud Computing ETF (CLOU) .
Seeking to track the Indxx Global Cloud Computing Index, the fund holds a basket of companies that potentially stand to benefit from continuing proliferation of cloud computing technology and services. The cloud computing industry refers to companies that (i) license and deliver software over the internet on a subscription basis (SaaS), (ii) provide a platform for creating software applications which are delivered over the internet (PaaS), (iii) provide virtualized computing infrastructure over the internet (IaaS), (iv) own and manage facilities customers use to store data and servers, including data center Real Estate Investment Trusts (REITs), and/or (v) manufacture or distribute infrastructure and/or hardware components used in cloud and edge computing activities.
The increasingly digital and connected world that form the backdrop for CLOU’s launch is exhibiting significant growth, and is expected to continue to grow over the coming years. The cloud computing industry that was estimated to be worth $188 billion in 2018 is expected to be worth over $300 billion by 2022, a nearly 15% annualized growth rate.
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>>> Best Thematic ETFs for 2020: Cloud, Internet of Things & More
Zacks
by Neena Mishra
January 31, 2020
https://finance.yahoo.com/news/best-thematic-etfs-2020-cloud-213209584.html
In this episode of ETF Spotlight, I speak with Jay Jacobs, Head of Research & Strategy at Global X. Global X is well known for its suite of 17 ETFs focused on disruptive growth trends.
Cloud is fast emerging as the new model of computing as many companies now prefer to rely on cloud based service providers for highly specialized computing services so that they can focus on their core businesses.
Cloud computing revenues soared 246% in the past decade, and are expected to grow by another 30% before 2023, according to Gartner.
The Global X Cloud Computing ETF (CLOU), which made its debut in April last year, has already gathered about $468 million in assets. While Amazon (AMZN) and Microsoft (MSFT)—the leaders in cloud computing—are included in the portfolio, the fund’s top holdings are pure-play cloud companies like Zscaler (ZS), Shopify (SHOP) and Twilio (TWLO).
The Internet of Things (IoT) has received a lot of attention over the past few years, thanks mainly to the growing appetite for smart, connected devices. The Economistsays in a recent issue: “One forecast is that by 2035 the world will have a trillion connected computers, built into everything from food packaging to bridges and clothes.”
5G technology will enable handling massive data volumes at very high speeds from billions of connected devices and unlock the full potential of the IoT.
The Global X Internet Of Things ETF (SNSR) holds companies that facilitate the IoT industry. Its top holdings include Skyworks (SWKS) and DexCom (DXCM).
The Global X Video Games & Esports ETF (HERO) invests in video game developers & publishers, hardware manufacturers, esports and streaming providers, and operators and owners of leagues. Nvidia (NVDA) and Electronic Arts (EA) are among the top holdings.
The Global X U.S. Infrastructure Development ETF (PAVE) could benefit from bipartisan support for investing in America’s infrastructure.
The Global X Thematic Growth ETF (GXTG) is a fund of funds that invests in a basket of individual thematic ETFs.
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>>> ETFs to Tap on Soaring E-Commerce Sales Amid Coronavirus
Zacks
by Sweta Killa
April 27, 2020
https://finance.yahoo.com/news/etfs-tap-soaring-e-commerce-140502534.html
ETFs Benefiting From Coronavirus-Induced New Normal Trends
The COVID-19 pandemic has ramped up the digital shift, which is likely to last longer than expected even after the economy reopens. E-commerce companies have been the most sought after on Wall Street as lockdowns have resulted in the forced closure of malls and retail stores.
E-commerce sales climbed at the highest pace since late February, jumping 25% during the week ending Apr 20, according to Signifyd’s E-commerce Pulse data. The jump surpassed the previous record of 17% for the week ending Apr 6. Overall, there is an increase of 85% in ecommerce spending since late February. According to the market research firm Rakuten Intelligence, e-commerce spending in the United States is up more than 30% from the beginning of March through mid-April compared with the same period last year (read: Hot ETFs to Tap Consumers' Digital Shift Amid Coronavirus).
Although online grocery sales were the least investor favorite, it has emerged as the hottest category during the epidemic. According to Nielsen and Rakuten Intelligence, U.S. online sales of consumer-packaged goods (CPG) — the kind of items typically sold in grocery stores — grew 56% for the week ending Apr 18. Food topped the list, with sales soaring 69.5% year over year, followed by a 57.5% surge in online sales of household care items and growth in the health and beauty care (47.7%), baby care (27.2%) and pet care (22.3%) categories.
Per Namogoo, online supermarket visits were up 162% from the year-ago levels in March and up 146% from February 2020.
Bloomberg stated that Amazon AMZN is the top-most, high-profile winner of the current environment. Shares of AMZN jumped more than 40% from a low hit last month and has nearly overtaken Apple AAPL in market capitalization. Goldman believes that the pandemic would “steepen the curve of Amazon’s long-term growth rate, drive incremental profitability, and further deepen the competitive moat around all of its businesses.”
Other e-commerce stocks saw bigger share-price rallies. Shopify SHOP is up more than 85% from a low hit earlier this month, becoming one of the most valuable companies in Canada, while Wayfair W has more than quintupled off a March low, having surged more than 400% over the period. Shares of eBay EBAY are also up nearly 50% from a low hit last month.
Below we have highlighted some ETFs to tap soaring e-commerce sales:
Amplify Online Retail ETF IBUY
This ETF offers global exposure to companies that derive 70% or more revenues from online and virtual retail by tracking the EQM Online Retail Index. The fund comprises 47 stocks and has attracted $257.1 million in its asset base. It charges 65 bps in fees per year and trades in average daily volume of 44,000 shares. The product has gained 27% in a month.
ProShares Online Retail ETF ONLN
This ETF focuses on global retailers that derive significant revenues from online sales. It tracks the ProShares Online Retail Index, holding 24 stocks in its basket. The product has amassed $76.7 million in its asset base and trades in paltry volume of around 26,000 shares a day on average. It charges 58 bps in annual fees from investors and has risen 26.9% in a month.
Global X E-commerce ETF EBIZ
This fund invests in companies positioned to benefit from increased adoption of e-commerce as a distribution model, including companies whose principal business is in operating e-commerce platforms, providing related software and services, and/or selling goods and services online. It has accumulated $10 million in its asset base and charges 50 bps in annual fees. The ETF sees average daily volume of 7,000 shares and is up 22.8% in a month (read: 5 Best Sector ETFs Halfway Through April).
O’Shares Global Internet Giants ETF OGIG
The fund invests in some of the largest global companies that derive most of their revenues from the Internet and e-commerce sectors that exhibit quality and growth potential by tracking the O’Shares Global Internet Giants Index. It holds a basket of 70 stocks and charges 48 bps in annual fees. OGIG has been able to attract $73.3 million in its asset base and trades in average daily volume of 49,000 shares. It has gained 18.2% in a month.
SPDR S&P Internet ETF XWEB
This product follows the S&P Internet Select Industry Index, holding 42 stocks in its basket. It charges 35 bps in annual fees and trades in a volume of 3,000 shares. With AUM of $14.2 million, the fund has gained 23.5% and carries a Zacks ETF Rank #2 (Buy).
Invesco NASDAQ Internet ETF PNQI
This fund offers exposure to the largest and most-liquid companies that are engaged in Internet-related businesses by tracking the Nasdaq Internet Index. Holding 81 stocks in its basket, it has AUM of $546.1 million and trades in lower volume of about 29,000 shares a day. It charges 62 bps in fees per year and carries a Zacks ETF Rank #2. PNQI has added 17.3% in a month (read: Stay-at-Home Boosts Netflix Q1 Subscribers: ETFs to Buy).
First Trust Dow Jones Internet Index Fund FDN
This fund follows the Dow Jones Internet Composite Index, giving investors exposure to the broad Internet industry. It holds about 42 stocks in its basket. FDN is the most popular and liquid ETFs in the broad technology space with AUM of $8.1 billion and average daily volume of around 470,000 shares. It charges 52 bps in fees per year and has a Zacks ETF Rank #2. The ETF is up 17.6% in a month.
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>>> E-Commerce ETFs Benefit from Record Online Holiday Sales
ETF Trends
December 26, 2019
https://finance.yahoo.com/news/e-commerce-etfs-benefit-record-201627254.html
Online retail-related ETFs are enjoying a great winter as U.S. consumers spent more online over this year's holiday shopping season, with e-commerce sales reaching a new record.
The traditional winter holiday shopping season is a key period for the retail sector, accounting for up to 40% of annual sales, Reuters reports.
Breaking down the retail segment, e-commerce sales this year made up 14.6% of the total, or up 18.8% for the same period last year, according to Mastercard’s recent data based on retail sales from November 1 through Christmas Eve. Overall holiday retail sales, excluding autos, increased by 3.4%.
“E-commerce sales hit a record high this year with more people doing their holiday shopping online,” Steve Sadove, senior adviser for Mastercard, told Reuters.
“Due to a later than usual Thanksgiving holiday, we saw retailers offering omnichannel sales earlier in the season, meeting consumers’ demand for the best deals across all channels and devices,” Sadove added, referring to how Thanksgiving landed on November 28 this year, or a week later than last year's November 22 date.
Mastercard spokesman William Tsang, though, did note that 2018’s 5.1% growth in total sales still eclipsed this year’s holiday sales growth.
Capitalizing On The Growth In E-Commerce
As more shoppers look to online deals and internet retail outlets, ETF investors can also capitalize on the growth in e-commerce through theme-specific ETF strategies. For example, the ProShares Decline of the Retail Store ETF (EMTY) and ProShares Long Online/Short Stores ETF (CLIX) both take a short position in brick-and-mortar retail stores to capitalize on weakness in traditional stores. Meanwhile, the ProShares Online Retail ETF (ONLN) takes on a long position in online retailers.
The Amplify Online Retail ETF (IBUY) has been a popular thematic play that targets global companies that generate at least 70% of revenue from online or virtual sales. As the market environment shifts and changes, investors may also have the opportunity to capitalize on the growth potential of the e-commerce segment. Amplify also expanded its line with the Amplify International Online Retail ETF (XBUY) . XBUY is an index-based ETF that takes on foreign companies or those outside the U.S. that are expected to benefit from the increased adoption of e-commerce around the world.
Additionally, the Global X E-commerce ETF (EBIZ) reflects the performance of the Solactive E-commerce Index and looks to invest in companies positioned to benefit from the increased adoption of E-commerce as a distribution model, including companies whose principal business is in operating E-commerce platforms, providing E-commerce software and services, and/or selling goods and services online.
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>>> ETF Strategist: Robotics and AI Will Be a Top Theme in 2020
ETF Trends
February 19, 2020
https://finance.yahoo.com/news/etf-strategist-robotics-ai-top-163134245.html
Investor participation and automation—it’s a top theme in 2020 that will persist as more technological advances take place in robotics and artificial intelligence (AI). As such, investors can look to an ETF like the Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ) , which has more than $1.5 billion in net assets—a sign investors are aware of its importance for disruptive technology exposure.
“I think this is intuitive with investors,” said Jay Jacobs, head of research and strategy at Global X ETFs. “They see that automation is getting more powerful, that companies are investing in robotics, they’re investing in bringing in AI systems, but they don’t really know where to start. Who are the big robotics companies?” he said. “They’re not ... common knowledge to U.S. investors. The ETF, I think, is a perfect example of giving people that exposure to the companies best positioned in the space.”
BOTZ seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
Additionally, BOTZ seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the Indxx Global Robotics & Artificial Intelligence Thematic Index. The index itself captures large and mid cap representation across 23 Developed Markets (DM) and 24 Emerging Markets (EM) countries.
From a trading standpoint, traders can use ETFs like the Robotics & AI Bull 3X ETF (UBOT) . UBOT seeks daily investment results equal to 300 percent of the daily performance of the Indxx Global Robotics and Artificial Intelligence Thematic Index, which is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence.
The robotics space is certainly in a push-pull dichotomy of investors capitalizing on the latest in disruptive technology, while at the same time, getting push back from those threatened by the wider adoption of robots. The fears are warranted given that robotics technology has the capacity to supplant human jobs.
Key characteristics of UBOT:
The Indxx Global Robotics and Artificial Intelligence Thematic Index (IBOTZNT) is designed to provide exposure to exchange-listed companies in developed markets that are expected to benefit from the adoption and utilization of robotics and/or artificial intelligence, including companies involved in developing industrial robots and production systems, automated inventory management, unmanned vehicles, voice/image/text recognition, and medical robots or robotic instruments, as determined by the index provider, Indxx.
Companies must have a minimum market capitalization of $100million and a minimum average daily turnover for the last 6 months greater than, or equal to, $2 million in order to be eligible for inclusion in the Index.
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>>> ETFs to Gain From Lifestyle Changes Amid Coronavirus Crisis
Zacks
Sweta Jaiswal, FRM
May 4, 2020
https://finance.yahoo.com/news/etfs-gain-lifestyle-changes-amid-205008557.html
The coronavirus outbreak has infected more than 3.5 million globally, with above 247,000 casualties, per Johns Hopkins University data. The United States alone has recorded a death toll of more than 67,000. The outbreak has caused an unprecedented collapse of economic activities as governments are forced to shut down commerce and implement social distancing measures in an effort to contain the spread of the virus.
The pandemic has resulted in some changes in the lifestyle and preferences of Americans. Most of the surveys have found that people are more interested in opting for online shopping rather than visiting a brick-and-mortar store for their purchases of essential food items and supplies. Even as the U.S. economy starts to reopen in phases and social distancing restrictions are being eased, people will try to minimize the human-to-human contacts. Against this backdrop, let’s look at some ETF areas that can gain from the lifestyle changes amid the crisis:
Work-From-Home Trend
In the current scenario, people have to maintain social distancing and work remotely. Resultantly, cloud computing is emerging as a key technology in the fight against coronavirus. Cloud computing and storage have empowered video conferencing, gaming, e-commerce shopping, remote project collaboration, online classes, editing, etc. It is supporting organizations in remotely processing a lot of information, developing and running key applications and services, and also helping employees across the world collaborate while working. Investors can look at the following ETFs that can gain from the trend -- First Trust Cloud Computing ETF SKYY and Global X Cloud Computing ETF CLOU (read: ETFs to Gain on Cloud Computing Growth Amid Coronavirus Crisis).
Online Shopping Trend
In order to avoid human-to-human contact, people are staying indoors and shopping online for all essentials, especially food items. In fact, non-store retail sales in March increased 3.1% sequentially and 9.7% year over year. Going by Signifyd’s Ecommerce Pulse data, there has been a 46% surge in overall e-commerce expenditures since late February. According to a Total Retail article, e-commerce sales are expected to grow more than 20% this year as there is an increasing number of first-time online shoppers. Against this backdrop, let’s look at some ETFs that can benefit from the new shopping trend like Amplify Online Retail ETF IBUY, ProShares Long Online/Short Stores ETF CLIX and ProShares Online Retail ETF ONLN (read: What's in Store for Work-From-Home ETF & Stock Earnings?).
Rising Digital Payments
In line with the rising online shopping trend, customers are resorting to digital payments to clear their bills, while merchants and utility providers are advocating the same. Per Statista, total transaction value in the Digital Payments segment should see a 15.3% year-over-year growth rate in 2020 on a 5.4% rise in users. In view of this, investors can tap ETFs like ETFMG Prime Mobile Payments ETF IPAY, Tortoise Digital Payments Infrastructure ETF TPAY and Global X FinTech ETF FINX.
Soaring Video Games Sales
Lockdown measures have resulted in a spike in video game sales to the highest level in March over a decade. Interestingly, according to Verizon, overall video-game Internet traffic has risen 75% since stay-at-home orders were imposed in the United States, per The Economist Group report. A NPD Group report, which keeps a track of physical retail sales and a subset of digital downloads in the United States, states that all game-related purchases, including software, hardware and accessories, totaled $1.6 billion (up 35% year over year) in March. The video games sales growth is the highest since March 2008, when sales had risen to $1.8 billion, per NDP Group. Against this backdrop, investors can bet on the ETFs like VanEck Vectors Video Gaming and eSports ETF ESPO and Global X Video Games & Esports ETF HERO (read: Stay-at-Home Trend Boosts Video Games Sales: ETFs to Gain).
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>>> 4 ETFs For Investing In FinTech And The Payments Industry
Nasdaq.com
by Prableen Bajpai
JUL 8, 2019
https://www.nasdaq.com/articles/4-etfs-for-investing-in-fintech-and-the-payments-industry-2019-07-08
Technological advancements are disrupting various industries, challenging traditional players to make timely adaptions in order to remain relevant. The payments industry is no exception. The innovations based artificial intelligence, cloud and biometrics coupled with demand for fast and secure cashless transactions, use of smart devices, internet penetration, increasing adoption of e-commerce and changing consumer demographics is bringing in a wave of digital transformation.
Here’s an overview of the payments industry and a look at the exchange traded funds (ETFs) providing an investment opportunity in this space.
Global revenue from payments surpassed $2 trillion in 2018 and is set to approach $3 trillion within the next five years. While cash continues to be king, the potential for digital payments is immense. The Digital Money Index of 84 countries that track the development of digital money readiness shows an improvement of 5.5% over the last five years.
China continues to lead the movement away from cash with the share of electronification increasing by more than ten-fold over the last five years, according to a McKinsey report. In terms of regions, North America is the first region to execute more than half of its transactions electronically. India is pushing its initiative dubbed as ‘Digital India’ which highlights “faceless, paperless, cashless” as one its professed roles.
Several studies recommend the potential benefits of digitized payments, ranging from time savings among consumers, increased sales revenues among businesses, reduced government administrative costs and higher tax collections. A research by Citi shows that “a 10% increase in digital money adoption by countries (constituting the index) would deliver a $150 billion lift in consumer spending, which raises business revenues, while digital payments also cut cash handling costs for services and businesses by $100 billion. Meanwhile, governments pocket $100 billion more in taxes and savings of $200 billion by digitizing disbursements. In total, up to $1 trillion of new flows would enter the formal economy.”
Here’s a look at some exchange traded funds which invest in companies that are a part of the transformation that’s underway.
The ETFMG Prime Mobile Payments ETF (IPAY) is a one of the oldest exchange traded funds providing exposure to stocks in the payments industry which is experiencing a shift from credit card and cash transactions to digital and electronic methods. The fund was launched in 2015 and has Prime Mobile Payments Index as its underlying benchmark index. In terms of geographies, the ETF has majority exposure to the U.S. with smaller exposure towards France, Netherlands, Germany and Japan. The ETF has a portfolio of around 40 stocks with the top ten holdings adding up to 48.62%.
The top ten holdings in its portfolio are:
Mastercard
Visa
American Express
PayPal Holdings
Fidelity National Information
Worldpay
FinServ
Square
First Data
Discover Financial Services
The ETF has $680.43 million as assets under management, 0.75% as expense ratio and has posted 35.14% year-to-date (YTD) returns.
Tortoise Digital Payments Infrastructure Fund (TPAY) is one of the recent ETFs, launched in 2019 providing access to the payments space. The ETF tracks the Tortoise Global Digital Payments Infrastructure Index represents 53 companies which are a prominent part of the global digital payments landscape. The ETF has $4.58 million as assets under management and an expense ratio of 0.40%. In the last three-months, it has given 8.93% returns.
The top holdings have a 45.62% allocation and comprise of companies such as:
Fleetcor Technologies
Square
First Data
FinServ
Worldpay
Fidelity National Information
American Express
MasterCard
Total System Services
Wirecard
Next is the Global X FinTech ETF (FINX). Launched in 2016, the ETF seeks to invest in companies that are on the leading edge of the emerging financial technology sector and are looking at industries such as insurance, investing, fundraising, and third-party lending through unique mobile and digital solutions. The ETF tracks the Indxx Global Fintech Thematic Index. The country-wise break-up reflects 70% exposure to the U.S., followed by countries such as Switzerland, Germany, Australia, New Zealand, Demark and Brazil.
With $415.58 million as assets under management and an expense ratio of 0.68% as expense, the fund has delivered 33.82% YTD returns. The ETF has close to 40 stocks in its portfolio with top ten holdings that combine to almost 55% of the portfolio.
First Data
FinServ
Fidelity National Information
Wirecard
Intuit
Square
PayPal Holdings
Adyen
Guidewire Software
Black Knight
ARK Fintech Innovation (ARKF) is another ETF has been launched in 2019. ARKF is an actively managed ETF with a focus on companies engaged in the theme of fintech innovation. The ETF holds a portfolio between 35-55 stocks with a large-cap bias. The ETF has posted 4.93% YTD returns. It has $72.09 million as assets under management and an expense ratio of 0.75%.
The top ten holdings of the ETF are:
Square
Tencent
Apple
Zillow
com
Alibaba
PayPal
Rakuten
LendingTree
Line
Final Word
Global investment in financial technology ventures more than doubled in 2018, to $53.3 billion. A major part of it came for a single record funding round worth $14 billion in Ant Financial, best known for its mobile payments service Alipay.
Juniper Research projects that the number of people using digital wallets touch nearly 50% of the world’s population by 2024, pushing wallet transaction values up by more than 80%. Overall, the global digital payments market is expected to reach $7.64 trillion by 2024, recording a CAGR of 13.7% (2019-2024).
With the advancement in payments industry and colossal scope for growth, these ETFs are a favorable way to be a part of the digital journey, which has begun across the globe.
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Quantum Computing - >>> “QTUM” ETF Capitalizes on the Field of Quantum Computing
ETF Trends
by BEN HERNANDEZ
NOVEMBER 25, 2019
https://www.etftrends.com/innovative-etfs-channel/qtum-etf-capitalizes-on-the-field-of-quantum-computing/
Disruption like artificial intelligence and robotics are in the forefront of technological advances, but other areas like quantum computing are powering the next generation of ETFs like the Defiance Quantum ETF (NYSEArca: QTUM).
Defiance ETFs notes multiple breakthroughs in the field of quantum computing.
“We have seen increased institutional interest in QTUM, given the recent announcement of Google reaching quantum supremacy,” says Chief Executive Officer Matthew Bielski.
QTUM tracks a rules-based index, known as the BlueStar Quantum Computing and Machine Learning Index, that gives investors exposure to the next generation of computing, including disruptive companies building out quantum computing and machine learning technology. The index is comprised of equity securities of leading global companies engaged in the research and development or commercialization of systems and materials used in quantum computing.
Areas within quantum computing include advanced traditional computing hardware, high powered computing data connectivity solutions and cooling systems, and companies that specialize in the perception, collection and management of heterogeneous big data used in machine learning. Additionally, iIndex components are assigned an equal weight subject to a liquidity overlay, index components are reviewed semi-annually for eligibility, and the weights are reset accordingly.
QTUM is part of an ETF family that also includes FIVG, the First 5G ETF; and DIET, focused on next gen food and sustainability.
Fund facts:
Quantum computers use principles of quantum mechanics to perform significantly more complex computations, and at exponentially faster speeds, than conventional computers.
Quantum Computing is set to fundamentally enhance Machine Learning, a subset of artificial intelligence, which gives computers the ability to “learn” with data, without being explicitly programmed.
Benefits of QTUM:
QTUM offers investors liquid, transparent and low-cost* access to companies developing and applying Quantum Computing and other transformative computing technologies.
The underlying index, BlueStar Quantum Computing and Machine Learning Index (BQTUM), tracks approximately 60 globally-listed stocks across all market capitalizations.
Equal weight methodology offers investors more precise exposure, including to smaller companies with more potential for growth.
In the business world, it’s adapt or die and the wave of disruption occurring in all sectors is weeding out companies that will be slow or resistant to innovation. This presents an opportunity for the discerning investor by capitalizing on companies that can’t keep up with the changing times.
Disruption isn’t relegated to startup companies taking an idea and simply building its core business model around it. It also affects existing companies whose outdated business models can no longer stem the tide of disruptive forces on revenue generation.
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>>> What are disruptors?
Disruptive companies may help shape the investing world for years to come.
Fidelity Investments
FIDELITY ACTIVE INVESTOR
04/20/2020
Some of the largest companies in the world are disruptors that introduced new business models and changed established industries to create entirely new ones. Examples are Amazon, Facebook, Netflix, and Uber.
While disruption (a subcategory of thematic investing) is not a new phenomenon, there are emerging opportunities to gain exposure to these types of innovative companies and themes—if it aligns with your strategy and objectives. Indeed, thematic investing can enable you to invest in long-term trends or themes that you believe in, and thematic funds can allow you to find opportunities that may cut across countries, sectors, and market capitalization.
If investing in a specific theme meets your objectives, disruption might be a thematic category to consider.
What are disruptors?
Disruptors are companies that have the potential to change or entirely displace existing companies and industries. These can entail innovative technologies or operations that are more efficient or make obsolete the old way of doing business—cloud computing, mobile payments, and autonomous driving to name a few.
"Disruptive companies have changed a range of traditional industries, bringing innovative approaches, often enabled by technology and internet platforms, to deliver products and services to customers," says Chris Lee, Managing Director of Research and co-portfolio manager of the Fidelity Disruptors Fund (FGDFX).
"Take what we've seen with shifts in how people watch movies at home, for example," Lee notes. "As preferences and technologies have changed from VHS and DVDs to streaming services, this has created investment opportunities amid disruption. Consider the divergent paths of Netflix and Blockbuster. Looking forward, the rollout of 5G could create further disruptive opportunities in this space. The same movie that might take several minutes to download on a 4G network may take just a few seconds on a 5G network."
While disruptors can be found across many areas of the economy, Fidelity has identified 5 key areas of disruption—automation, communications, finance, medicine, and technology.
"Automation is one of the most powerful trends our research team is watching in the world today," according to Chris Lee. "For example, there's amazing innovation happening on the factory floor to improve efficiency and increase safety through the use of industrial robotics and advanced sensory equipment.
Lee also notes that disruptive technologies are transforming consumer experiences through internet and mobile platforms. "Our research teams see many more disruptive opportunities for new business models to deliver unique value to consumers and improve our daily lives, not to mention the advances in machine learning and companies harnessing the explosion of data and shift to cloud computing."
Risteard Hogan, Managing Director of Research and co-portfolio manager of Fidelity's Disruptive Funds, notes the prevalence of disruptive companies helping to develop and deliver more efficient financial solutions. "Think about the growth of mobile payments," he says. "We're seeing rapid growth in payments made over mobile devices, offering faster and more secure transactions, yet the penetration rate is still low. This suggests that we may be in the early innings of a long-term disruptive trend."
Fidelity recently launched 6 new disruptive funds:
Fidelity Disruptive Automation Fund (FBOTX) - Invests in companies leading the way in automation, from industrial robotics to artificial intelligence and autonomous driving.
Fidelity Disruptive Communications Fund (FNETX) - Invests in companies changing the way we connect and communicate, from social media to 5G-related digital infrastructure and the internet of things.
Fidelity Disruptive Finance Fund (FNTEX) - Invests in companies helping to deliver more efficient and customized financial solutions, such as digital payments and internet banks.
Fidelity Disruptive Medicine Fund (FMEDX) - Invests in companies that are transforming medical diagnostics, therapies, and services, from gene therapy to robotic surgery and digital health platforms.
Fidelity Disruptive Technology Fund (FTEKX) - Invests in new technologies such as companies delivering cloud computing, harnessing big data, and transforming consumer experiences through internet and mobile platforms.
Fidelity Disruptors Fund (FGDFX) - Brings together 5 disruptive themes—automation, communications, finance, medicine, technology—in a single fund.
Disruption is happening across the scope of medical therapies and services as well. Hogan notes the excitement from Fidelity's research about the breakthrough innovation in life sciences tools and equipment that is fundamentally changing our understanding of human biology.
"Our research is uncovering companies that can now use new methods to create drugs for both very rare diseases as well as other large untapped markets. Our team is anticipating that these advancements will help foster the creation of new biotech companies, some of which will invent the drugs of the future in areas like immunoncology, cell therapy, gene therapy, targeted therapies, and more."
Is disruption a theme for you?
Most or all of the investing risks associated with other categories of stocks exist for disruption as well. You should do your due diligence on any individual stock, fund, or other investment to fully understand its characteristics and risks.
Disruptive investments may also carry some unique characteristics to evaluate. For example, in some cases disruptors may exhibit higher than average levels of volatility, as investors may have differing opinions on the near-term prospects for these industry-changing companies. This can create opportunities for investors with a long-term focus; however, it also reinforces the importance of diversification. "Thoughtful portfolio construction can help mitigate company-specific risks and overall portfolio volatility," says Michael Kim, quantitative analyst and co-portfolio manager of Fidelity's Disruptive Funds. If you are interested in these types of investments, you may want to consider a disruptive fund that balances precision to a given theme with exposure across a range of companies and sub-themes.
A common myth about disruption funds is that they are too narrow or too focused for an investor's portfolio. In fact, a thematic fund can hold dozens of stocks, with stocks from different regions, sectors, and market caps. These funds can typically serve as a satellite holding to gain exposure to a theme you believe in alongside a broader diversified portfolio.
The growth in disruptive investments has been substantial with increased investor interest and new fund offerings (see sidebar).
Disruptive companies may shape what the market looks like for years to come. Disruption funds may focus on long-term trends that are still developing, and depending on your investing objectives and risk constraints, these investment opportunities may be worth considering.
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>>> The Intelligence Community is Keeping a Close Watch on AI
ETF Trends
January 28, 2020
https://finance.yahoo.com/news/intelligence-community-keeping-close-watch-163947092.html
It takes more than a fancy suit and a plethora of mechanical devices at one’s disposal to be an international spy these days. In the current landscape, it’s disruptive technology like artificial intelligence that is paving the way for future innovations in the intelligence community.
Per a Defense One report, “At the Intelligence Community’s Open Source Enterprise, AI is performing a role that used to belong to human readers and translators at CIA’s Open Source Center: combing through news articles from around the world to monitor trends, geopolitical developments, and potential crises in real-time.”
While AI can do a majority of the tedious tasks, it’s still important for the intelligence community to have an understanding of the technology that does the actual work.
“Imagine that your job is to read every newspaper in the world, in every language; watch every television news show in every language around the world. You don’t know what’s important, but you need to keep up with all the trends and events,” said Dean Souleles, chief technology advisor to the principal deputy to the Director of National Intelligence. “That’s the job of the Open Source Enterprise, and they are using technology tools and tradecraft to keep pace. They leverage partnerships with AI machine-learning industry leaders, and they deploy these cutting-edge tools.”
A Pair of Cybersecurity ETFs to Spy On
As AI continues to become a major component of the intelligence community, security-focused ETFs can benefit further, such as the First Trust NASDAQ Cybersecurity ETF (CIBR) and the ETFMG Prime Cyber Security ETF (HACK) .
First up, CIBR seeks investment results that correspond generally to the price and yield of an equity index known as the Nasdaq CTA Cybersecurity IndexSM. The index is comprised of securities of companies classified as “cybersecurity” companies by the CTA.
Next, HACK seeks investment results that correspond generally to the price and yield performance of the Prime Cyber Defense Index. The index tracks the performance of the exchange-listed equity securities of companies across the globe that (i) engage in providing cybersecurity applications or services as a vital component of its overall business or (ii) provide hardware or software for cybersecurity activities as a vital component of its overall business.
For a broad play in disruptive tech, investors can look at the Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ) . BOTZ seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
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>>> Best Thematic ETFs for 2020
Zacks
by Sweta Jaiswal, FRM
January 9, 2020
https://finance.yahoo.com/news/best-thematic-etfs-2020-213209569.html
E-Commerce ETFs Boosted by the Stay-At-Home Economy
Globally, thematic investing has tripled over the past five years to around $40.76 billion, per Morningstar Inc. This is steadily taking over the investment world, largely due to the introduction of theme-based funds and also for its long-term and easy-to-comprehend approach. Thematic investing requires investment in companies that can benefit from the technological, demographic and environmental changes (read: Top ETF Areas for 2020).
Let’s take a look at some of the themes that are currently in vogue.
AI, Robotics, and Cyber Security
We are living in an era that is largely dominated by AI applications and technological advancements. Revolutionary technologies like AI, ML and IoT are fast changing the business landscape by expanding opportunities, growing revenues and enhancing efficiencies. In fact, a Research and Markets report states that the global robotics market is expected to see a CAGR of 25% between 2019 and 2024. Now the application of robots is not just limited to industrial use but a plethora of other areas like healthcare, entertainment, retail, automobile and defense.
However, increasing adoption of these technologies is exposing businesses, governments and organizations to cyber risks. Given the severity of the situation, Cybersecurity Ventures expects the worldwide expenditure on cybersecurity to surpass $1 trillion cumulatively from 2017 to 2021. Per a Grand View Research report, the global cyber security market is expected to reach a worth of around $241.1 billion, at a CAGR of 11% from 2019 to 2025. We have shortlisted the following ETFs for our investors to consider:
Global X Robotics & Artificial Intelligence ETF BOTZ
The fund tracks investment results that correspond generally to the performance of the Indxx Global Robotics & Artificial Intelligence Thematic Index. Notably, the fund provides exposure to the performance of companies which benefit from increased adoption of AI, robotics and automation. The fund has 38 holdings with an AUM of $1.52 billion. It charges 68 bps in fees (read: ETFs to Gain as Surgical Robots Rise in Popularity).
iShares Robotics and Artificial Intelligence Multisector ETF IRBO
The fund tracks investment results that correspond generally to the performance of the NYSE FactSet Global Robotics and Artificial Intelligence Index. Notably, the fund provides exposure to companies that could benefit from the long-term growth and advancement in robotics and AI. The fund has 103 holdings with an AUM of $65.7 million. The fund charges 47 bps in fees (read: Here's Why You Should Invest in Robotics ETFs).
ETFMG Prime Cyber Security ETF HACK
The fund is a portfolio of companies providing cyber security solutions that include hardware, software and services. It seeks investment results that correspond generally to price and yield, before fund fees and expenses, of the Prime Cyber Defense Index. Having amassed $1.52 billion in AUM, the fund charges 60 basis point in fees (read: 5 Tech ETFs Riding High on Iran Tensions).
Funds Focused on Climate Change
In 2020, climate change risks will be a mainstream discussion for building portfolios as it can be more expensive to ignore then to face them (per a Financial Times article). Therefore, to gain from this trend of considering climate change while building portfolio, investors can focus on alternative energy funds and/or environmental, social and governance (ESG) investing strategy. In fact, per Morningstar Inc., funds that consider the ESG parameters in the investment strategies outperform those that do not consider. Interestingly, 73% of ESG indexes have been beating their non-ESG counterparts since inception.
Meanwhile, alternative energy includes any energy source that acts as a replacement to conventional and non-renewable fossil fuel. Going by an International Energy Agency (IEA) report, worldwide supplies of renewable electricity are estimated to expand 50% within five years. Moreover, according to the IEA, renewable energy sources are anticipated to make up 30% of the world’s electricity by 2024 in comparison to the current 26%.
Thus, investors can take a look at the following ETFs:
Xtrackers MSCI USA ESG Leaders Equity ETF USSG
The fund tracks the investment results that correspond generally to the performance of the MSCI USA ESG Leaders Index. Notably, the MSCI USA ESG Leaders Index is comprised of large and mid-cap companies in the U.S. market and provides exposure to companies with superior ESG performance in comparison to their sector peers. The fund has 314 holdings with an AUM of $1.70 billion. The fund charges 10 bps in fees (read: 9 Successful New ETFs of 2019).
Vanguard ESG U.S. Stock ETF ESGV
The fund tracks the performance of the FTSE US All Cap Choice Index comprising large, mid, and small-capitalization stocks. It does not include companies operating in adult entertainment, alcohol and tobacco, weapons, fossil fuels, gambling, and nuclear power industries. It also doesn’t consider companies not meeting U.N. global compact principles and diversity criteria. The fund has 1531 holdings with an AUM of $895.5 million. It charges 12 bps in fees (read: Are ESG ETFs the Right Choice for 2020?).
Invesco Solar ETF TAN
The fund is based on the MAC Global Solar Energy Index which is comprised of companies in the solar energy industry. It has 22 holdings. The fund’s AUM is $460.7 million and the expense ratio is 0.70% (read: Best & Worst ETF Zones of 2019).
ALPS Clean Energy ETF ACES
The fund seeks to track the performance of an index comprised of U.S. and Canadian based companies that primarily operate in the Clean Energy sector. It comprises 32 holdings. The fund’s AUM is $121.3 million and expense ratio, 0.65%.
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Cybersecurity - >>> Trump is in a heated fight with Iran and these stocks are benefitting from it
by Brian Sozzi
Yahoo Finance
January 8, 2020
https://finance.yahoo.com/news/trump-is-in-a-heated-fight-with-iran-and-cybersecurity-stocks-are-benefitting-from-it-161818164.html
The broader stock market may be confused on what to do amid rising tensions between the Trump administration and Iran.
But active traders seem more definitive: the cybersecurity space is a can’t miss opportunity. That’s at least as long as the U.S. is battling it out with Iran and even Iraq on the battlefield and Twitter. The ETFMG Prime Cyber Security ETF — donning a cute ticker symbol of ‘HACK’ — is breaking out to new highs as investors bet corporations will aggressively ramp up spending on cybersecurity protection.
Otherwise known among traders as simply the cybersecurity ETF, the investment vehicle counts cybersecurity stalwarts Cisco, Palo Alto Networks and Fortinet as several of its top 10 holdings.
The ETF has outperformed the S&P 500 the last five sessions during the peak of the geopolitical tensions, rising 2.5% versus unchanged for the broader S&P. But cybersecurity names outside of the ETF’s top 10 holdings have been hotter: CrowdStrike has soared 8.7% while FireEye has tacked on 5%.
“Cyberattacks are a key element to modern warfare and are a likely tactic for Iranian retaliation. The potential threat is beneficial to cybersecurity stocks and are a must own for a so-called “war-time portfolio,” says Renaissance Macro strategist Jeffrey deGraaf.
The rotation into cyber security names at the moment is not without merit.
Iran is responsible for a minimum of 14 major cyberattacks around the world in recent years, according to the Center for Strategic and International Studies. From 2011 to 2013, Iran is said to have unleashed cyberattacks on major U.S. financial institutions such as JPMorgan, Bank of America and Wells Fargo.
“The most likely course of action [cyberattack] is still against an ally that has possibly spent less time and energy on hardening themselves against cyber threats. Saudi Arabia likely presents an easier target with less ability to retaliate effectively,” writes strategists at Academy Securities.
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Cybersecurity - >>> As Cyber Fraud Increases, It’s Artificial Intelligence to The Rescue
ETF Trends
January 29, 2020
https://finance.yahoo.com/news/cyber-fraud-increases-artificial-intelligence-170443622.html
As technology continues to advance, it gives cybercriminals more tools to defraud consumers and in turn, companies are fighting back with artificial intelligence (AI). This gives disruptive-focused ETFs more prominence as AI sets out to fight the good fight.
“In response, many financial sector companies are adopting AI to combat both staff and customer fraud,” wrote Jeff Palmer in IT Pro Portal. “Banks already use AI to detect and prevent payment fraud and employ image-recognition systems for security. What is less widely known is that some companies are also now successfully using AI to comb call records for GDPR breaches or even monitor live calls to flag mis-selling and rogue trading in real-time.”
“Among the variety of applications of AI in the financial sector is speech recognition, which offers numerous possibilities, including voice-based account servicing, robo-advice, autonomous analysis of audio archives and live ‘sentiment analysis’ of customer calls as well as the real-time transcription of any audio feed to allow instant decisions to be made,” Palmer added. “Giants such as Deloitte are now using AI to help enforce compliance and mine their audio data for additional business insights. For instance, automated speech recognition (ASR) technology in audio monitoring can set live triggers on chosen keywords, which can include major financial announcements and other announcements that can have an impact on share prices. This monitoring capability can also detect potential issues, signs of insider trading and patterns of misconduct such as rogue trading.”
Secure Profits in Cybersecurity with These ETFs
As AI continues to become a major component of the intelligence community, security-focused ETFs can benefit further, such as the First Trust NASDAQ Cybersecurity ETF (CIBR) and the ETFMG Prime Cyber Security ETF (HACK) .
First up, CIBR seeks investment results that correspond generally to the price and yield of an equity index known as the Nasdaq CTA Cybersecurity IndexSM. The index is comprised of securities of companies classified as “cybersecurity” companies by the CTA.
Next, HACK seeks investment results that correspond generally to the price and yield performance of the Prime Cyber Defense Index. The index tracks the performance of the exchange-listed equity securities of companies across the globe that (i) engage in providing cybersecurity applications or services as a vital component of its overall business or (ii) provide hardware or software for cybersecurity activities as a vital component of its overall business.
For a broad play in disruptive tech, investors can look at the Global X Robotics & Artificial Intelligence Thematic ETF (BOTZ) . BOTZ seeks to invest in companies that potentially stand to benefit from increased adoption and utilization of robotics and artificial intelligence (AI), including those involved with industrial robotics and automation, non-industrial robots, and autonomous vehicles.
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Amazon Prime Air Seen Surging Fivefold to 200 Jets, Rivaling UPS
Bloomberg
By Spencer Soper
May 22, 2020
Kentucky air hub could emerge as key to more national service
Amazon now offers service to small a number of destinations
https://www.bloomberg.com/news/articles/2020-05-22/amazon-prime-air-will-grow-to-200-planes-rival-ups-study-says?srnd=premium
Amazon.com Inc.’s Prime Air fleet will grow to about 200 planes -- up from 42 now -- in the next seven or eight years, creating an air cargo service that could rival United Parcel Service Inc., according to a study.
“At a time when many other airlines are downsizing due to the pandemic, Amazon’s push for faster and cheaper at-home delivery is moving ahead on an ambitious timetable,” said the report issued Friday by DePaul University’s Chaddick Institute of Metropolitan Development. “Amazon Air’s robust expansion makes it one of the biggest stories in the air cargo industry in years.”
Amazon unveiled the air cargo service in 2016, prompting speculation that it would ultimately create an overnight delivery network to rival delivery partners UPS and FedEx Corp.
Prime Air operates out of smaller regional airports close to its warehouses around the country, helping Amazon quickly move inventory to accommodate one- and two-day delivery. For that reason, some analysts have dismissed Amazon as a potential competitor to UPS and FedEx since it can only offer limited service to a small number of destinations and seems designed to handle Amazon packages.
Key to its ability to take on the entrenched players, the report says, is Amazon’s new $1.5 billion facility near Cincinnati that will accommodate up to 100 planes and as many as 200 flights each day. Amazon’s lack of a central hub has kept it from competing in the overnight delivery services offered by UPS and FedEx, which have more planes flying to more destinations.
“The massive investment being made in a large hub at Cincinnati/Northern Kentucky International Airport, however, could change everything,” the report says. “This hub appears to be the linchpin to Amazon’s efforts to develop a comprehensive array of domestic delivery services.”
A separate report released Monday noted Amazon’s lack of a central hub in concluding it was not a competitive threat to FedEx, which has a hub in Memphis, or UPS, which has one in Louisville. FedEx’s network can offer 9,000 daily flight connections, UPS’ 5,500 and Amazon Air just 363, according to the report from Bernstein.
“The viability of a commercial overnight offering from Amazon remains very limited,” Bernstein analyst David Vernon wrote. “Offering a low cost on shipping to a small number of markets every so often will never be a serious competitive threat.”
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>>> Don’t Leave Fintech ETFs Out of the Best New 2019 ETFs
ETF Trends
December 20, 2019
https://finance.yahoo.com/news/don-t-leave-fintech-etfs-170905787.html
The conversation about what makes new ETFs successful almost always leads to dollars, meaning assets under management, but that topic should be discussed in relative terms. For instance, some rookie ETFs addressing refined market segments or disruptive niches can take a while to catch investors' eyes.
On that basis, the ARK Fintech Innovation ETF (ARKF) , which debuted in February, is off to a stellar start. The first actively managed ETF in the fintech space, ARKF already has $72 million in assets under management.
ARKF invests in equity securities of companies that ARK believes are shifting financial services and economic transactions to technology infrastructure platforms, ultimately revolutionizing financial services by creating simplicity and accessibility while driving down costs.
ARKF can hold between 35 and 55 stocks and as of Dec. 19, the fund was home to 43 names, led by Square (SQ) and Apple (AAPL) with that duo combing for over 15% of the fund's weight. Integral to the ARKF thesis is the fact that ARK sets credible standards for defines a fintech investment.
“A company is deemed to be engaged in the theme of Fintech innovation if (i) it derives a significant portion of its revenue or market value from the theme of Fintech innovation, or (ii) it has stated its primary business to be in products and services focused on the theme of Fintech innovation,” according to the issuer.
Primed For Growth In 2020
ARK is higher by nearly 11% in the current quarter, indicating it could be ready for more upside in 2020. Fortunately, that thesis is bolstered by credible fundamental factors.
“The global fintech market was valued at about $127.66 billion in 2018 and is expected to grow to $309.98 billion at an annual growth rate of 24.8% through 2022,” according to a recent Business Research report.
ARKF's active management style has been a boon as the fund has averted lagging fintech lenders, such as Elevate Credit (ELVT), Enova (ENVA), FlexShopper (FPAY), LendingClub (LC), and OnDeck Capital (ONDK) , Each of those names was spotted trading below their initial public offering prices earlier this month.
Likewise, if ARK's team sees opportunities in those names or areas of the fintech market, it can exploit those odds more effectively than index-based rivals because ARKF isn't constrained by a benchmark.
In terms of fintech niches on more solid ground, the booming mobile payments could again be a catalyst for ARKF in 2020.
Payments are increasingly going digital with a number of start-ups seeing venture capital seed money to help facilitate online purchases. According to the research company Pitchbook, data shows that investors put $18.5 billion into the payment processing sector in 2018--an increase of five times the previous year.
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>>> E-commerce ETFs rally sharply as bricks-and-mortar underwhelms
May 19, 2020
By Andrea Riquier
https://www.marketwatch.com/story/e-commerce-etfs-rally-sharply-as-bricks-and-mortar-underwhelms-2020-05-19?siteid=yhoof2&yptr=yahoo
E-commerce focused exchange-traded funds jumped Tuesday as a fresh round of updates from big retailers confirmed more consumer activity was moving online. The ProShares Online Retail ETF (ONLN), -1.22% rose nearly 2% midday, while the Amplify Online Retail ETF (IBUY), -0.51% and Global X's E-Commerce ETF (EBIZ), -0.33% were both up 1.3%. The ProShares fund, which was enjoying its biggest daily move in about three weeks, has as its biggest holding shares of Amazon.com Inc. AMZN, -2.05%, while EBIZ has its biggest position in Shopify Inc SHOP, +3.13% and IBUY's biggest holding is Revolve Group Inc. RVLV, +0.45%. On Tuesday morning, Walmart Inc. WMT, -0.36% said U.S. same-store sales rose 10%, but online commerce surged 74% as Americans hunker down at home to wait out the coronavirus pandemic. Separately, Pier 1 Imports Inc PIRRQ, -17.64% said it would file for bankruptcy protection.
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>>> Online Retail ETF Becomes King of its Category
ETF Trends
January 15, 2020
https://finance.yahoo.com/news/online-retail-etf-becomes-king-154901016.html
The Amplify Online Retail ETF (IBUY) is the first ETF dedicated to booming e-commerce space, but that's not the only superlative tied to this fund. These days, IBUY is the largest retail ETF of any stripe, having recently surpassed the SPDR S&P Retail ETF (XRT) for supremacy in this category.
As of Jan. 13, XRT, the oldest retail ETF; had $205 million in assets under management while IBUY's asset tally was close to $249 million, according to ETFdb data.
“In October for the first time, assets in the biggest online retail exchange-traded fund topped those of the largest broad retail ETF,” reports Andrea Riquier for MarketWatch. “That fund, the SPDR S&P Retail ETF, made up of companies that do most of their business in the physical, not online, world. As of Thursday, XRT, referring to its ticker symbol, had $236 million in assets, compared with $249 million in the e-commerce-focused fund, the Amplify Online Retail ETF.”
IBUY has been a popular thematic play that targets global companies that generate at least 70% of revenue from online or virtual sales. As the market environment shifts and changes, investors may also have the opportunity to capitalize on the growth potential of the e-commerce segment.
Going Inside IBUY
Recently, several brick-and-mortar retailers reported disappointing holiday sales, but overall sales were strong thanks to e-commerce.
Breaking down the retail segment, e-commerce sales this year made up 14.6% of the total, or up 18.8% for the same period last year, according to Mastercard’s recent data based on retail sales from November 1 through Christmas Eve. Overall holiday retail sales, excluding autos, increased by 3.4%.
This year, online sales are projected to surpass $4 trillion, with the biggest players in the field largely expected to capture a major share of the growing pie. For example, Amazon is estimated to account for half of all online sales by 2023. Although IBUY is younger than XRT, the former has consistently outperformed the latter.
“XRT has been around since 2006, while IBUY launched in 2016. Over the past 12 months, XRT has returned 3.1%, according to FactSet, while IBUY gained 20.1%,” according to MarketWatch.
IBUY has an international counterpart, the Amplify International Online Retail ETF (XBUY) . XBUY is an index-based ETF that takes on foreign companies or those outside the U.S. that are expected to benefit from the increased adoption of e-commerce around the world.
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>>> An ETF for Fintech Innovation
MoneyShow
March 10, 2020
https://finance.yahoo.com/news/etf-fintech-innovation-100000061.html
Financial technology, or fintech, is a relatively new and growing part of the market, explains Jim Woods, exchange-traded fund expert and editor of The Deep Woods.
It features interesting companies that transform the way in which we engage in transactions, as well as how financial processes are handled on a business-to-business level. One way to gain exposure to this theme is through the actively managed exchange-traded fund ARK Fintech Innovation ETF (ARKF).
This fund seeks to be on the cutting edge of new technology in this space. According to ARK Invest, fintech innovation companies include those involved in transaction innovations, blockchain technology, risk transformation, frictionless funding platforms, customer-facing platforms and new intermediaries, among other areas.
All these themes, of course, have the potential to create hugely profitable ventures. While the blockchain craze has largely died down, there still are companies that are legitimately engaged with the technology as a source of profit.
Financial technology may be a more interesting theme than companies that have, as was popular a few years ago, simply appended “blockchain” to their names to attract investors.
The largest position in this fund by far is Square (SQ), the maker of small card readers for small businesses. The company’s technology has become ubiquitous over the past few years, and shareholders have profited handsomely.
This fund is up by about 20% over the last year. It currently trades at a small premium to net asset value (NAV), as usual, and has an expense ratio of 0.75%.
With assets under management of just $83 million, this fund falls below my recommended threshold for investment, but its strategy is an interesting one that merits bringing to your attention. ARKF has powered upward since October, leaving its moving averages in the dust.
Top holdings for this fund include Square, Tencent Holdings (TCHEHY), Apple (AAPL), MercadoLibre (MELI), 4.48% and PayPal Holdings (PYPL).
New investment themes for investors to consider are always interesting. If you believe that the frontier of fintech is a promising source of further upside, ARK Fintech Innovation ETF (ARKF) may be a fund worth considering for possible investment.
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Fintech - >>> How To Cash In On Money's Coming Makeover
Investors Business Daily
MATT KRANTZ
12/19/2019
https://www.investors.com/etfs-and-funds/sectors/fintech-stocks-invest-in-money-cash-technology/?src=A00220&yptr=yahoo
Money is about to get a face-lift. And investors are looking to which fintech stocks will cash in.
Everything about money — from the way it's spent, stored and invested — is up for new forms of digitization. Investors see a massive opportunity.
Nearly $25 billion in venture capital funding poured into financial technology firms this year through the third quarter, says industry tracker CBInsights. The latest deluge of funding comes just one year following a record-breaking $40.6 billion put into the industry in 2018. And this year's haul is more than the $18.8 billion invested in all of 2017.
These are private companies. But leading public fintech stocks are up big too this year. Which fintech stocks let investors play the future of money now?
There are three primary ETFs to help you buy into the public companies leading the fintech charge -
ETFMG Prime Mobile Payments ETF (IPAY) is the largest with assets of $782.8 million.
The ETF owns 40 publicly traded companies at the epicenter of payment services and processing. The ETF's largest holding, at 7.5%, is Global Payments (GPN). The company processes digital, credit card and check payments. It operates not only in North America, but also Europe and Asia.
Shares of Global Payments are up 75% this year as investors applaud its robust growth. The company's revenue jumped more than 29% in the third quarter to $1.1 billion. Analysts are looking for the company's revenue to grow 62% in 2020 and earnings per share to rise 22% to $7.55.
Such strong fundamentals and chart action explain why Global Payments carries a sky-high 97 IBD Composite Rating.
What makes ETFMG Prime Mobile somewhat unique is its large stakes in credit card processors, says Todd Rosenbluth, director of ETF and mutual fund research at CFRA. The ETF, for instance, puts a more than 18% combined weighting in Visa (V), Mastercard (MA) and American Express (AXP).
The credit card companies have performed strongly this year and are turning into important plays to get into fintech stocks. Visa, the largest company of the three, has seen shares jump 41% this year. The credit card stocks are among the top performers in the S&P 500 this year.
ETFMG Prime Mobile Payments charges 0.75% annually. It's up 41.6% this year through Dec. 17, 2019.
A Narrower Fintech Stock ETF
Another major player in the fintech ETF space is -
Global X FinTech ETF (FINX). The ETF, with assets of $414 million, owns 34 stocks.
The Global X FinTech ETF's largest holding, at 14%, is Fiserv (FISV). Shares of the payment processing provider are up nearly 60% this year.
There are strong fundamentals to back up Fiserv's stock price gains, too. The company's profit this year is on track to rise nearly 30% to $4.02 a share. And in 2020? Analysts are calling for an annual profit of $4.91 a share, up 22% from 2019.
The Global X FinTech ETF charges 0.68% annually. And it's up 35.8% this year through Dec. 17.
Another Approach
ARK Fintech Innovation ETF (ARKF) is a new entrant in the industry. It traces its inception to Feb. 4, 2019. It brings an active selection process to find ways to buy into new products or services "that potentially (change) the way the financial sector works."
The fund is still small, with assets of roughly $82 million. But it's looking to differentiate itself from the larger options. The ETF's top holding is payment services provider Square (SQ) at 9.5% of the portfolio. But the ETF adds shares of companies working different angles than other fintech stocks.
For instance, the ETF's second-largest holding after Square is Apple (AAPL) at 6.1%, followed by China's Tencent (TCEHY).
And that's why Rosenbluth, when looking at the fintech ETFs, warns: "Despite similar sounding names what's inside these thematic funds and their performance records in 2019 are quite different."
Dave Nadig, managing director of ETF.com, has a larger warning. He points out these ETFs are limited to publicly traded firms. That's a big drawback in fintech, he says. "The vast majority of interesting fintech companies are still private, so this is probably money chasing already richly valued, public companies," he said.
Three Ways To Play Fintech Stocks
ETF Symbol YTD % Ch. Assets ($ millions) Expense Ratio
ETFMG Prime Mobile Payments ETF IPAY 41.6% 782.8 0.75%
Global X FinTech ETF FINX 35.8% 414.4 0.68%
ARK Fintech Innovation ETF ARKF 18.4% 81.7 0.75%
<<<
Gold sector -- >>> 5 Top Gold Stocks for 2019
These five gold stocks look best poised for riding any rally in gold prices during 2019.
Neha Chamaria
Jul 15, 2019
https://www.fool.com/investing/5-top-gold-stocks-for-2019.aspx
Thanks to high gold prices and industry consolidation, 2019 is shaping up to be a golden year. Gold prices started to rally in late 2018 as economic and geopolitical concerns sent shock waves through global stock markets. Uncertainty in the market brings gold's appeal as a safe-haven asset to the forefront, and persistent economic tension could keep gold prices on a firm footing throughout 2019.
Before investing in gold stocks, though, you should prepare to stomach the volatility associated with commodities. Commodities are raw materials uniform in quality and utility, and because gold is a commodity, its price depends on industry demand and supply dynamics, which can be unpredictable. As the price of gold fluctuates, so do the fortunes of gold companies and their stocks.
Owning gold stocks is one of the best ways to gain exposure to the precious metal, as well as to diversify your portfolio. Investors who own stocks of low-cost gold producers that are also generating strong operating and free cash flows should see meaningful returns in the long run. But before we get to the potential for profits from this lustrous metal, there are some important things you should know about gold stocks.
What is gold and what is it used for?
Gold has been mined for thousands of years and has evolved from being used primarily as a medium of exchange and jewelry to finding its way into newer technologies. The yellow metal has come a long way and is now one of the most valuable modern commodities. But what makes gold so expensive that one ounce sells for a whopping $1,200 today?
To start, gold is a rare element that's hard to extract from under the ground, where it's usually found. The World Gold Council says it's easier to find a 5-carat diamond than a 1-ounce gold nugget! Gold is also one of the most malleable, soft, and ductile metals, which means it can be stretched, hammered, and molded into any shape without breaking. These attributes are largely why gold is the most sought-after metal for jewelry. Globally, jewelry accounts for nearly half of the total demand for gold.
Commercially, gold's high thermal conductivity and resistance to corrosion, among other chemical characteristics, make it a crucial input in several industries, especially electronic components, medicine (particularly dentistry), aerospace, and glass making. Central banks across the globe also hold tons of gold in reserves.
Given gold's scarcity and vast variety of uses, owning gold in some form is a prudent investment decision. One way to accomplish this is by investing in gold stocks.
What are gold stocks?
Gold stocks are simply stocks of companies that revolve around gold. The industry mainly comprises gold mining companies that mine and sell gold, so when you buy a gold company's stock, you effectively purchase an ownership stake, and then the company's performance determines your returns.
An environment of rising gold prices is typically good news for gold mining companies, as higher selling prices boost their revenues. So far, 2019 is turning out to be a positive year for gold prices, making it an opportune time to buy gold stocks for the first time or to add to your existing position.
In fact, there couldn't be a better time to buy gold stocks, given the ongoing industry consolidation. Two massive recent deals -- Barrick Gold's (NYSE:GOLD) merger with Randgold Resources and Newmont Mining's (NYSE:NEM) impending acquisition of Goldcorp (NYSE: GG) -- are creating the world's two largest publicly traded gold mining companies. More recently, Barrick Gold even made a takeover bid for Newmont Mining, but the two gold mining giants have only agreed to combine their operations in Nevada in a joint venture as of this writing. These developments make investing in gold stocks now incredibly interesting.
The industry isn't just mining companies but also gold streaming and royalty companies, which act as middlemen in the sector. Gold streamers like Franco-Nevada (TSX:FNV) and Royal Gold (NASDAQ:RGLD) are among the largest players in the industry today.
List of the 10 largest gold stocks
Gold Stock Business Model Market Capitalization*
Barrick Gold Mining $23.29 billion
Newmont Mining $18.33 billion
Franco-Nevada Streaming (gold, platinum group, and oil and gas) $14.51 billion
Agnico-Eagle Mines (NYSE:AEM) Mining $10.4 billion
Goldcorp Mining $9.67 billion
Kirkland Lake Gold (NYSE:KL) Mining $7.62 billion
Royal Gold Streaming (gold) $6 billion
AngloGold Ashanti (NYSE:AU) Mining $5.4 billion
Kinross Gold (NYSE:KGC) Mining $4.29 billion
B2Gold (NYSEMKT:BTG) Mining $2.96 billion
*MARKET CAPITALIZATION AS OF MARCH 13, 2019. SOURCE: YAHOO! FINANCE.
Other notable gold stocks include miner Yamana Gold (NYSE:AUY) and streamer Wheaton Precious Metals (NYSE:WPM). However, Wheaton derives a major chunk of revenue from silver, which is why it's better known as a silver stock.
So which gold stocks are the best buys for 2019? First, let's learn why you want to invest in gold stocks in the first place.
Is gold a good investment?
There are many moving parts that impact the price of gold. Nearly 50% of the demand for gold is in the form of jewelry, according to the World Gold Council, primarily from markets like China and India, where gold has cultural and sentimental value.
In the financial markets, gold is typically considered a hedge against inflation and uncertainty, which is why global events like Brexit and trade wars can fuel demand, driving up prices of the metal. Central bank policies such as interest rates, fluctuations in the value of the U.S. dollar, and macroeconomic data are other factors that can affect gold prices.
Unsurprisingly, any gold-related investment comes with its fair share of volatility and risk. Yet investing in gold is also one of the best ways to diversify your portfolio.
Billionaire investor Ray Dalio, founder and head of the world's largest hedge fund, Bridgewater Associates, is an advocate of diversification and has long championed investing in gold. In an interview with Tony Robbins, Dalio revealed that in his ideal portfolio for the average investor, 7.5% is gold.
Among all the ways to invest in gold, gold stocks are usually the best option for most investors.
Why should you invest in gold stocks?
Buying physical gold in any form -- bars, coins, medals, or even jewelry -- is the most direct way to gain exposure to gold prices. But buying physical gold also means you have to pay high commissions and bear additional costs and risks related to the transportation, storage, and insurance of the precious metal.
Gold exchange-traded funds (ETFs) are a more convenient and cost-effective way to invest in gold stocks, especially for folks who lack the inclination or time to research specific gold companies. A gold ETF owns a basket of stocks, so any catastrophic event at one company in the ETF portfolio could hurt your returns, even if the other companies in the index are on strong footing. Conversely, you don't have to be a stock-picking guru to enjoy the gains achieved by the sector winners if you invest in a gold ETF.
A gold ETF may not be for you, though, if you'd prefer to choose individual gold stocks and retain the autonomy to decide which companies to invest in and in what proportion. Gold stocks offer the highest return potential to investors, because in theory, a company's share price should eventually reflect the company's operational and financial growth. That means shares of a fundamentally strong gold company that's maximizing returns on invested capital and is committed to shareholders can earn investors strong returns in the long run, even in a low-price environment for gold. Of course, investing in stocks itself is risky, and it's no different with gold stocks.
The risks of investing in gold stocks
The biggest risk for gold companies is that their key driver of sales and profits -- gold prices -- is hugely unpredictable. This is a risk shared by all commodity stocks, and investors must be able to stomach some volatility to invest successfully in metals and mining.
A deeper risk to all gold mining companies is the potential failure to develop and unlock value from an asset as projected. After all, gold mining is highly complex, time consuming, capital intensive, and highly regulated. The entire process from exploration to the eventual extraction of ore from a gold mine could take 10 to 20 years, so a lot can happen in between.
Barrick Gold's Pascua-Lama project is a fine example. When Barrick started construction at the mine in 2009, it projected average annual gold production between 750,000 and 800,000 ounces in the first five years, starting in 2013. But the project was mothballed in 2013 when it ran into regulatory hurdles over environmental concerns. Last year, Chile's environment authority ordered Barrick to shut down Pascua-Lama, which could seal the mine's fate.
Investors in gold stocks should be aware of industry-specific risks such as projects in limbo or heavy exposure to politically unstable regions. Be sure to factor in particular risks to the subsector occupied by the gold company you're considering backing.
What is gold streaming and how is it different from gold mining?
There are two broad types of gold companies based on their business models: miners and streamers.
Gold mining is the extraction of gold from underground mines. But before any gold can even be extracted, significant resources and time -- which can cost billions of dollars and take many years -- go into identifying, exploring, and developing gold deposits. Miners also have to cross several regulatory hurdles and obtain permits and licenses to be allowed to construct a mine. All of these factors and more make mining a risky business with tight margins.
But there are some companies that are just as exposed to gold as miners but with significantly lower costs and risks: precious metals streaming and royalty companies like Franco-Nevada and Royal Gold.
Gold streaming companies don't own and operate mines. They enter into "streaming agreements" with mining companies under which they secure the right to purchase a predetermined percentage of gold (and any other metal agreed upon) from the miner in the future, and at a price considerably below the spot gold price. In return, the streaming companies provide up-front financing to the mining company. Eventually, streaming companies generate revenue from the sale of the metal, just like mining companies.
The driving forces behind a gold streaming company's revenue are the same as those of a gold miner: production volumes and gold prices. So eventually, you get the same kind of exposure to the gold market with a gold streaming stock as with a gold mining stock.
The big difference, and one that works in favor of investors in the long run, is that a gold streamer doesn't produce gold, so it operates at substantially lower costs than a miner does. Gold streaming companies don't have to bear any of the costs and risks associated with mining, and they can buy gold at reduced prices. For example, Royal Gold's cost of sales, or the purchase price it paid for gold and other metals like silver and copper under its streaming agreements, was just $83.8 million, compared to its revenue of $459 million, in its fiscal year 2018, which ended June 30.
Of course, it's not all hunky-dory for precious metal streamers. There are two major drawbacks to the streaming business model.
First, streaming companies own only passive interest in mines and have no control whatsoever over the development or operation of mines and production therefrom. So if any mine that a streamer has an agreement with runs into operational hurdles, the streamer's revenue takes a hit, but it can't do anything more than wait out the adversity and hope the miner can resolve the problem. Royal Gold faced such delays last year.
The second risk to gold streamers is leverage and share dilution. Streaming companies often resort to debt or issuing new shares of stock to raise the funds to finance deals with miners, which can weaken their balance sheets.
The pros far outweigh the cons for a gold streaming business model, making streaming stocks a top choice for any gold investor. My five top gold stock picks for 2019 and beyond include gold streaming companies. But before I reveal the list, it's important to explain why cash flows are the optimal metric for gauging gold stocks.
How to value and buy gold stocks
Mining is a long, drawn-out process that carries significant risks including economic shocks, commodity price volatility, regulatory compliance failures, and natural disasters. Any event that impairs a miner's ability to develop a mine or a mine's operational capacities could result in the depreciation of the asset's value. A miner has to regularly look for signs of any potential change in an asset's value as per accounting policies and record impairments as necessary. Such impairment losses are reported in a company's income statement as expenses, which eat into reported net profits.
While one-time asset writedowns and impairments are part and parcel of the gold mining business, they can distort the true picture of the health of the company's operations, especially in the case of streaming companies like Royal Gold and Franco-Nevada that do not actually own the impaired asset.
For example, Royal Gold reported a noncash impairment charge of $239.1 million in its fiscal year ended June 30, 2018, related to Barrick Gold's Pascua-Lama mine, resulting in the streamer reporting a net loss of $113.1 million for the year despite generating record revenue. Adjusting for the impairment charges and one-time tax items, Royal Gold's adjusted net income grew 14% in FY 2018. Royal Gold's operating cash flows also hit record highs in the year.
This example demonstrates why it's more prudent to analyze Royal Gold based on its cash flows than on its earnings. Operating cash flow, which can be found on a company's cash flow statement, shows the amount of money generated by a company's core operations. Cash flows are more relevant than net income for gold companies, which also means that gold investors should utilize cash flow-based valuation metrics instead of the popular price-to-earnings ratio (P/E ratio). When you analyze gold stocks, pay closer attention to cash flows.
There's another important operational metric used in the gold industry that every gold investor should be aware of: all-in sustaining costs (AISC). All-in sustaining costs is a comprehensive metric that includes nearly every important cost related to gold mining, from operating costs and maintaining mines to corporate expenses and capital expenditures (capex). A lower AISC indicates greater cost efficiency. In an industry in which factors driving revenue are largely unpredictable, cost efficiency holds the key to profitability.
Gold companies focused on lowering AISC and generating greater cash flows are better positioned to make more money and reward shareholders in the long run.
The best gold stocks to buy in 2019
While higher gold prices should bode well for any company that makes money from selling gold, the ones that have strong production visibility, cost advantages, and strong financials to back their growth plans stand a better chance of winning in the long run.
With that in mind, I believe Royal Gold, Barrick Gold, Agnico-Eagle Mines, and Franco-Nevada are among the best gold stocks to buy now. For investors looking to add a broader array of gold stocks to their portfolio while avoiding stock research, I recommend this gold ETF: VanEck Vectors Gold Miners ETF (NYSEMKT:GDX).
The winning gold stock you can buy for cheap
Royal Gold is a gold streaming and royalty company that derived 77% of its revenue from gold in its 2018 fiscal year.
Royal Gold's history is worth a look: It was founded in 1981 as an oil and gas exploration and production company, and it was only after oil prices crashed years later that Royal Gold shifted focus to gold, eventually entering the gold streaming business in 1987.
Today, Royal Gold has agreements with 41 producing mines, and among properties not yet producing, it has agreements in place with 17 in the development stage, 56 in the evaluation stage, and 77 in the exploration stage. Royal Gold generated nearly 76% of revenue from only six mines in its last fiscal year. Some mines, such as Goldcorp's Penasquito and Barrick-Goldcorp's co-owned Pueblo Viejo, are not only among the world's largest gold mines, but they have expected mine lives of at least 10 years each.
In fact, Royal Gold has agreements with three of Barrick Gold's five key mines, including Pueblo Viejo and Nevada-based Cortez and Goldstrike. Barrick's new CEO Mark Bristow calls them "world-class mines" where growth is a priority. In other words, these mines are among the few offering significant growth optionality to Royal Gold in coming years.
Royal Gold is already on strong footing, having generated record revenue and operating cash flow in its fiscal year 2018. Royal Gold's cash flows have risen steadily over the years, enabling the company to grow its dividend at a solid compound annual growth rate (CAGR) of 19% since 2001.
Royal Gold has a great track record of creating shareholder value, and with shares now trading considerably below their five-year price-to-operating cash flow average despite the company generating record flows, this is one top gold stock to consider buying.
This gold stock is undergoing a major transformation
Barrick Gold, the world's largest gold mining company in 2017 by annual gold production, took a major growth leap by acquiring Randgold Resources in a bid to remain the industry leader.
Barrick and Randgold's combined 2017 gold production of roughly 6.6 million ounces gives the new Barrick a considerable lead over rival Newmont Mining, which produced roughly 5.3 million ounces of gold in 2017. Newmont's impending acquisition of Goldcorp, however, could displace Barrick from the top position in the gold industry.
Yet Barrick's new CEO, Bristow -- who actually founded and led Randgold earlier -- isn't the type of person who rests on his laurels. Barrick stunned the market by bidding for Newmont Mining, which was rebuffed by the latter. Instead, the two companies are combining their operations in the high-potential Nevada region, targeting $500 million in annual pre-tax synergies for the first five years.
After its Randgold acquisition, Barrick now owns 5 out of the world's top 10 Tier One gold assets, including Cortez, Goldstrike, and Pueblo Viejo (60% ownership), with two other mines -- Goldrush/Fourmile and Turquoise Ridge (75% stake) -- that have potential to become Tier One assets. Barrick defines a Tier One asset as a mine with a life span of at least 10 years that produced at least 500,000 ounces of gold in 2017 at a total cash cost per ounce within the bottom half of the cost curve defined by research firm Wood Mackenzie, or less than $748 per ounce.
Barrick and Randgold's reported combined total cash cost for 2017 of $538 per ounce of gold also makes the combined company one of the lowest-cost gold producers in the industry. Barrick by itself was among the most cost-efficient gold producers, with a projected AISC of $765 to $815 per ounce of gold for 2018.
Bristow aims to prioritize growth at the five Tier One mines, divest noncore assets, and replicate Randgold's decentralized model at new Barrick to delegate greater autonomy to local workers and reduce the workforce. Bristow is also keen to settle Barrick's long-standing disputes, such as the one between the Tanzanian government and Acacia Mining, which is owned 64% by Barrick.
These initiatives, combined with the Nevada joint venture in which Barrick owns a 61.5% stake, should boost Barrick's cash flows and help it strengthen its balance sheet further. Before the Randgold merger, Barrick was focused on paring down debt and has nearly halved its long-term debt since 2015. Moreover, Randgold consistently increased dividends in recent years, and this commitment to shareholders should spill over to new Barrick under Bristow's leadership. In short, here's a bigger, leaner Barrick Gold in the making, which is why the gold stock looks good at a price-to-cash flow less than 9.
This gold stock could spring a surprise in 2019
Agnico-Eagle Mines is currently the third-largest gold producer by market capitalization. Given the ongoing consolidation in the gold industry, Agnico-Eagle Mines is likely to make a growth move soon.
Canada-based Agnico-Eagle Mines officially came into existence in 1957 when Cobalt Consolidated Mining Company, which was formed when five struggling silver miners joined hands in 1953, rechristened itself Agnico Mines. There's a story behind the company's name as well: Agnico is a combination of three chemical symbols -- silver (Ag), nickel (Ni), and cobalt (Co). In 1972, Agnico merged with Eagle Gold Mines to become Agnico-Eagle Mines, and then it listed its shares on the Toronto Stock Exchange and the U.S. Nasdaq.
Agnico-Eagle Mines has come a long way, now operating eight mines, including Canada's largest open-pit gold mine, Canadian Malartic, in a 50-50 partnership with Yamana Gold. In 2017, Agnico-Eagle Mines produced a record 1.7 million ounces of gold, exceeding its own estimate for the sixth straight year while bringing down costs along the way: In 2017, its total cash cost was only $558 per ounce of gold versus $640 per ounce in 2012, and AISC was $804 per gold ounce.
To be sure, Agnico-Eagle Mines' production is expected to drop in fiscal 2018 because of lower production from a couple of mines, but the miner is on track to grow its gold production to 2 million ounces by 2020 from roughly 1.53 million ounces in 2018, as its Nunavut assets, particularly Meliadine and Amaruq deposits, start production this year.
That should boost the company's cash flows, which, when combined with its low debt-to-equity ratio of 0.35, leaves it with ample room to make meaningful growth moves including acquisitions. In the past 10 years, Agnico-Eagle Mines' cash flow from operations has more than quadrupled, and it has paid out a dividend since 1983, rewarding shareholders with a 10% dividend increase in October 2017. That reflects Agnico-Eagle Mines' financial fortitude, making it one of the top gold stocks to buy for 2019 and beyond.
The best gold dividend stock
Franco-Nevada is a gold streaming company like Royal Gold, but the company offers something other streaming companies don't: exposure to platinum-group metals as well as oil and gas.
Newmont Mining acquired Franco-Nevada in 2002, only to sell its portfolio of royalty assets in 2007 to give birth to the precious metals streaming and royalty company, Franco-Nevada, as we know it today. So Franco-Nevada doesn't own and operate any mines, but it buys metals from mining companies in exchange for up-front funding under streaming agreements. In a royalty deal, Franco-Nevada finances the miners, but instead of getting metals in return, it receives a percentage of sales from the corresponding mine.
Franco-Nevada had streaming and royalty agreements attached with 51 producing, 35 advanced, and 208 exploration-stage assets that belong to some of the largest mining companies in the world, as of Nov. 5, 2018. Lundin Mining's Candelaria, Glencore's Antapaccay, Teck Resources' Antamina, and Coeur Mining's Guadalupe-Palmarejo are some of the largest contributors to Franco-Nevada's current gold production, while KGHM International's Sudbury mine in Ontario is its key source of platinum-group metals.
In 2016, Franco-Nevada made a bold bet by making a foray into oil and gas royalties with an investment in the STACK shale play of Oklahoma and the Permian Basin, an oil-rich area spanning west Texas and New Mexico. The company has invested roughly $860 million in U.S. oil and gas royalties in the past three years and expects oil and gas revenue to grow nearly 177% between 2017 and 2022, although it still aims to generate at least 80% of revenue from precious metals in the foreseeable future. For context, in 2017, Franco-Nevada generated roughly 77% revenue from gold, 16% from silver, and 7% from platinum-group metals.
Between 2008 and 2017, Franco-Nevada's gold equivalent ounce (GEO) production grew nearly fivefold, and revenue jumped more than fourfold. With high-profile gold mines like First Quantum Minerals' Cobre Panama ramping up aggressively to start production in 2019, Franco-Nevada foresees its GEO rising 17% by 2022, setting it up for strong cash-flow and dividend growth in coming years. So far, Franco-Nevada has diligently returned a good chunk of cash flows to shareholders in the form of annual dividend increases every year since 2008. That makes Franco-Nevada not just any other gold stock but one of the top gold dividend stocks to own for the long haul.
The ultimate gold investment for instant diversification
An ETF is a basket of investable securities such as stocks that tracks an index and is traded on a major stock exchange, giving investors an opportunity to diversify their holdings by buying one low-cost, tax-effective investment. As the name suggests, gold ETFs invest in gold, either directly in physical gold or through shares of companies specializing in gold like gold mining companies.
The VanEck Vectors Gold Miners ETF tracks the NYSE Arca Gold Miners Index, which comprises stocks of gold and silver companies listed on international stock exchanges. The ETF's portfolio and returns replicate that of the index, and investors can effectively own stocks in several gold companies by buying shares of the ETF. As of March 13, 2019, the ETF held 46 stocks, and its top seven holdings accounted for 47.38% of its net assets:
Barrick Gold
Newmont Mining
Franco-Nevada
Newcrest Mining
Wheaton Precious Metals
Agnico-Eagle Mines
Goldcorp
Buying shares of the VanEck Vectors Gold Miners ETF means you're indirectly buying shares of all of the above and more companies, including both gold mining and gold streaming companies.
Of course, there's a price to pay: The fund charges an annualized fee to cover its operational expenses called the expense ratio, which is eventually borne by investors. The VanEck Vectors Gold Miners ETF has an expense ratio of 0.53%, which means the fund will deduct 0.53%, or $5.30, for every $1,000 you invest.
Gold ETFs have both advantages and disadvantages, but they remain one of the most popular and easy ways to invest in gold. With assets under management (AUM) of nearly $10.6 billion, the VanEck Vectors Gold Miners ETF is the largest gold ETF that invests in gold companies. For investors looking for widespread exposure to gold in 2019 but not keen on picking individual gold stocks, this ETF is by far the best investment alternative for betting on the precious yellow metal.
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>>> How to Invest in Cybersecurity Stocks
The cybersecurity industry is growing fast; it’s also changing fast. Here’s your comprehensive guide to making an investment.
Nicholas Rossolillo
Aug 2, 2019
https://www.fool.com/investing/how-to-invest-in-cybersecurity-stocks.aspx
As the increasingly digital world transforms the way we live, the bad guys are changing how they live and work, too. That means cybercrime is on the rise around the globe, both in frequency and in complexity. In fact, according to a 2018 study conducted by security outfit McAfee, cybercrime costs an estimated $600 billion a year -- just shy of 1% of global GDP (the value of all goods and services provided in any given year).
That enormous cost has put companies, government entities, and other enterprises under pressure. Protecting their own sensitive information and keeping customer data safe and secure are top priorities in today's digital age. A breach in security can lead to lost trust, lost credibility, and ultimately lost business.
Enter the cybersecurity industry, a service sector that is growing and changing fast to keep up with online threats. Since it doesn't produce a tangible good or service the everyday consumer can recognize, cybersecurity doesn't make for the sexiest of technological investments. And the rate of change required to stay ahead of those with nefarious intent means investing in cybersecurity companies can be tricky.
Still, there's no doubt investors are keen to get in on this growing sector of the economy. And there are plenty of investments from which to choose.
All sorts of businesses are lining up to keep the digital world safe. Some offer security as part of a larger technology offering, while others make cybersecurity their one and only focus. The type of cybersecurity also differs, with some companies working to offer a comprehensive software package to keep data secure, while others aim to solve a specific pain point with software for login security or device security.
With attacks via the internet not going away anytime soon, investors looking to make money from the trend should look at investing in the stocks of cybersecurity-only companies to maximize growth potential. Read on for an in-depth look at how to figure out how to invest in cybersecurity stocks.
The basics of analyzing cybersecurity companies
Investing in cybersecurity stocks, especially those representing companies that are solely focused on cybersecurity, is not as simple as picking the companies posting the largest sales growth. Many outfits that make cracking down on cybercrime their only endeavor are not yet profitable, so understanding a few less obvious measures is helpful.
Generating income and holding onto it
Revenue (money earned for providing a service or selling a product) is of course the logical place to start, but gross profit margin is important to look at, along with the top line. Gross profit margin subtracts from revenue the cost to provide a service or the cost to produce and sell a product. The larger the gross margin, the better; that means the company keeps more money. Software-based services generally scale to a higher profit margin than hardware sales because the product is produced once and can be sold countless times after that (versus hardware, which needs to be manufactured for every customer). Thus, as cybersecurity is basically a software industry, many cybersecurity companies have the potential to become lucrative businesses.
However, developing software is expensive up front and doesn't start paying off until enough customers sign up for the service. Newer companies will thus typically have lower gross margin than established companies as they make less money and have to spend more to acquire customers -- making fast revenue generation an important factor to consider when looking at small start-up cybersecurity companies.
Not all services are created equal
Then there are the specifics surrounding how a company gets paid. Most cybersecurity companies break revenue into two basic categories: (1) subscriptions and (2) support and professional services.
Subscription revenue (sometimes called product or software revenue, as the category covers recurring service delivered via a piece of software or other security product) is far more valuable, as it is less-labor intensive once established. That's often the case because a company can sell the same package many times with minimal work. Subscriptions are also sold as ongoing licenses or contracts, which means the revenue stream is more predictable and stable over the long term. The more predictable a business is, the fewer negative surprises will crop up for investors, and this helps keep the stock price less volatile.
By comparison, purchase of the support and professional services backing up the software tends to be billed as lumpy one-time payments and isn't as profitable for the company. For example, during the first quarter of 2019, Okta made $8.1 million in professional services revenue. However, the cost to produce those services was $10.6 million, leaving a $2.5 million loss for the segment due to high labor costs. However, subscriptions generated $117.2 million in sales and ran at a 79.1% gross profit margin, meaning the company kept $92.7 million of that total.
Track the number of customers
For a smaller company trying to establish itself, adding fresh customers will be the most important metric pointing out how well the company is building a profitable base.
For a larger company, existing customer activity is equally -- if not more -- critical. Look for what are called net dollar retention or dollar-based net expansion rates, which measure the amount of money existing customers are spending compared year to year. If the figure is under 100%, the implication is that customers are leaving or spending less. If the metric is over 100%, it means the business is selling more to its customers. Loyal patrons who spend more on services over time can be a powerful force that boosts the bottom line.
How much it costs to run the business
Moving down the income statement, operating expenses can be a tricky item to get a read on. Operating expenses cover costs not associated with producing a service but still necessary to keep the lights on. Because cybersecurity is growing and changing fast, research and development expenses can require a hefty cash outflow every year. Sales and marketing also tend to be elevated for companies that are jockeying for new clients. High costs in these areas tend to be the biggest reason a cybersecurity company operates in the red.
However, many of them are profitable on an "adjusted" basis. Thus, adjusted operating expenses (and therefore adjusted earnings) are important to look at as they back out things like stock-based compensation to employees and only factor in actual cash expenses. Investors will want to see stock-based pay decrease as a company matures, but while it's in growth mode, that expenditure tends to be elevated as companies use it as an incentive to attract and retain talent.
Closely related to this is the free cash flow metric -- or money left over after basic operating expenses and capital expenditures are paid for. This is a much more accurate measure of any company's true profitability. For example, when reporting on its fiscal 2019 third quarter (the three months ending April 30, 2019), cybersecurity leader Palo Alto Networks (NYSE:PANW) reported a net loss of $20.2 million on revenue of $727 million. After making adjustments, though, free cash flow was positive $276 million, good for a profit margin of 38% and up 30% year over year. Making non-cash adjustments can tell a very different story.
The digital age ups the ante for cybersecurity
In recent years, a couple of key trends in technology have led to cybersecurity becoming a hot industry. One is the boom in cloud computing.
The cloud refers to computing being done remotely at a data center. Video streaming is an example of cloud computing that millions of Americans make use of daily. Rather than play a movie or TV show at home on a DVD or Blu-ray player, consumers are making use of a library of entertainment content contained at a data center (like one hosted by Netflix), which they access via the internet for a fee.
That remote cloud-based business model has surged in popularity in the business world as well. Rather than expending their own computing power or purchasing software that needs to be downloaded at the office, companies are utilizing the cloud to get the digital tools they need. Cloud computing -- and the subscription-based model it often employs -- has been a winning strategy in recent years.
It also creates an expanding need for security services to protect all of that information being stored and used online. According to internet infrastructure company Cisco, global internet traffic is expected to grow an average of 26% every year through 2022. That's a lot of new data that needs to be kept safe.
Another development boosting the need for cybersecurity is the proliferation of devices connected to the internet, often identified by the catch-all phrase the "Internet of Things," or IoT. It's not just computers, tablets, and smartphones anymore. On the consumer side of the equation, everything from wearables like watches and headphones to household items like TVs and appliances is getting hooked up to the internet. For a business, connected devices can include industrial equipment, vehicles, or shipping containers.
The number of devices hooked up to the internet -- and the trail of digital data they create that needs to be collected and secured -- is staggering. Cisco estimates there were 2.4 networked devices for every man, woman, and child alive in 2017. Through 2022, the number of devices per person is expected to grow to 3.6. Put more simply, that would be roughly 28.5 billion devices connected to the internet in 2022, up from 18 billion in 2017.
How data is being protected
With data getting created all over the place by billions of devices, the responsibility placed on companies to keep it all secure is getting heavier all the time. The onus of that responsibility is increasingly being placed on cybersecurity companies and their various solutions.
Hardware versus software
Firewalls have traditionally been the first line of defense. A firewall is either a physical device attached to a network or software that acts as a gatekeeper, monitoring traffic and deciding what data to allow in and what data to block. Companies like Cisco still offer firewalls in hardware form, but with so much of computing moving to the cloud, software-based firewalls are gaining in importance. Top vendors migrating to cloud-based gatekeeping include Palo Alto Networks and Fortinet.
Technology to the rescue
The sheer amount of sensitive information and mission-critical data out in cyberspace isn't the only challenge, though. The complexity of attacks is also increasing, with bad actors looking for and exploiting holes in the vast communication and data networks between organizations, their employees, and their customers. Artificial intelligence and its subdiscipline machine learning -- a software system that mimics the human brain and learns from experience -- will be key factors in suppressing digital crime. Security software providers like Palo Alto Networks and Fortinet are putting the technology to use and are among the leaders in this area. Palo Alto, for example, launched an AI-based service called Cortex that hunts down, attacks, and automates threat detection.
New developments in cybersecurity
Then there are newer defense mechanisms that analyze information and adapt to operational changes in real time. These approaches include SIEM (security information and event management) and SOAR (security orchestration, automation, and response) and are among the fastest-growing segments of the cybersecurity industry. Legacy technologist IBM offers SIEM with its QRadar product. Newer entrants to the scene, like FireEye, have come out with similar offerings, and Palo Alto Networks and big-data analytics firm Splunk have added SOAR services to their respective software lineups.
All of these various companies and services have been moving toward simplifying the security process for companies' IT teams. Security operations can be complicated for organizations, so a one-stop-shop solution (or as close to one as possible) carries substantial appeal, but there are other offerings that cater to more specific needs.
Endpoint protection, which secures the hundreds of millions of new devices (computers, tablets, smartphones, and other connected devices being used by a company's employees or customers) coming online each year, is one such niche. CrowdStrike Holdings (NASDAQ:CRWD) specializes in endpoint security and recently completed a successful public debut on the stock market. IAAM (identity, authentication, and access management) is another specialized need that helps organizations ensure that only those who should have access to data are getting into the network. Okta is a leader in the IAAM space.
How big is the potential?
Although cybersecurity is a newer industry, and many companies are not yet profitable, the long-term potential is nevertheless great. According to research firm Global Market Insights, the industry's overall growth is expected to be 12% a year through 2024, going from $120 billion a year in 2017 to more than $300 billion. That means smaller cybersecurity pure-play stocks could be big winners in the years ahead.
While larger companies that aren't pure players could be less volatile -- such as Cisco or software giant Oracle, which offers security capabilities as part of its larger suite of services -- it's smaller companies that are poised to get the biggest bump if they succeed at disruption. Smaller niche players and start-ups could end up eating the lunch of their bigger and clunkier peers.
CrowdStrike is a perfect example. Though the company was founded in 2011 and completed its initial public offering of stock (IPO) in June 2019, it's already valued at a market cap of $14 billion (as of this writing). Okta is another example. It posted 50% revenue growth during the first quarter of 2019 and is currently valued at $14.8 billion. By comparison, Palo Alto Networks is currently the largest cybersecurity-focused company out there and is currently valued at $20.3 billion.
How to pick cybersecurity investments
The easiest way for investors to play the general rise in the importance of cyberprotection is via an exchange-traded fund like the First Trust NASDAQ Cybersecurity ETF (NASDAQ:CIBR) or the ETFMG Prime Cyber Security ETF (NYSEMKT:HACK). Both offer passive exposure to the industry through a portfolio of stocks and charge investors an annual fee of 0.6%.
There are a few key differences to keep in mind, though. Larger companies make up a larger percentage of First Trust NASDAQ Cybersecurity ETF's stock portfolio, and it excludes the smallest of cybersecurity stocks (anything with a market cap under $250 million gets tossed out). ETFMG Prime Cyber Security ETF weights its various stocks more equally -- regardless of how large the company is -- and includes smaller start-ups (valued all the way down to $100 million).
Getting in on tiny start-ups early sounds appealing, but it doesn't always pay off quickly. In this case, First Trust NASDAQ Cybersecurity ETF's focus on larger firms has yielded a 44% return compared to ETFMG Prime Cyber Security ETF's 30% since the summer of 2015 -- the earliest common date since the two funds' inception. In this case, focusing on larger companies that have jumped out to an early lead has been the better strategy.
Choosing individual companies
Investors who want to get pickier with their cybersecurity stocks could focus on the largest players in the security space. They could also focus on those companies with the strongest momentum right now. Here's a checklist of things for investors to consider:
Look for companies that are not just adding new customers but also expanding relationships with existing ones.
If a company is growing more slowly than the security industry (about 12% a year though the next five years, according to some estimates), is there a good reason why? If not, pass.
If a cybersecurity company is not yet profitable, make sure it's making headway on gross margin, operating margin, or adjusted earnings.
Operating expenses are often elevated or rising faster than sales, so check that the spending is translating into revenue generation. For a larger and established company, revenue growth should be outpacing spending; for a smaller or start-up company, the gap between revenue growth and high expense growth should be narrowing over time.
Innovation is a must in this fast-changing industry. Is the company investing in research and development to stay relevant? Is it succeeding?
Are there rivals to a cybersecurity company's service? If so, compare the other company's growth rate and resulting valuation. If one company trades at a premium to its peers, there should be a good reason why (i.e., higher revenue growth, higher profit generation, etc.).
Traditional metrics like price-to-earnings ratios usually don't help when deciding which cybersecurity stock to invest in. If a company doesn't have earnings, the metric doesn't exist. For small, fast-growing stocks, pick ones with high rates of revenue growth and compare their price-to-sales ratios (the lower the ratio, the more of a value it is). However, a more expensive stock might still be worth the money if it is growing faster than its peers.
For larger, established companies, use the price-to-free-cash-flow ratio to decide on a better value. Even larger cybersecurity outfits should be growing by double-digits at this stage of the game, but the lower the price-to-FCF ratio, the greater the value. However, a higher number is acceptable if growth is outpacing that of other large companies.
A note on risk
It is worth bearing in mind that, whether investing in a basket of cybersecurity stocks via an ETF or creating your own collection of stocks, the cybersecurity industry is a volatile one. As is the case with high-growth sectors, stocks tend to bounce around in value quite a bit, and steep declines are the norm. This can be driven by anything from a high-profile security breach at a large organization, a miss in expected revenue growth at a security comapny, or higher-than-anticipated expenses to acquire customers or develop new technology.
No matter the direction you choose, though, investing in cybersecurity stocks holds a lot of promise. Keeping the digital world a safe place is a big job -- one that will only get bigger. The swift pace of change in the underlying technology means the ride will be an especially bumpy one. Investors will therefore want to stay focused on the long term and expect some turbulence. But for those who can be patient and have the fortitude to buy when stock prices dip, investing in cybersecurity should be a profitable endeavor for the long haul.
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>>> 3 Soaring Cloud Computing ETFs
Benzinga
May 11, 2020
https://finance.yahoo.com/news/3-soaring-cloud-computing-etfs-221015316.html
The technology sector is proving to be a premier source of strength this year. Just look at the tech-heavy Nasdaq-100 Index (NDX), which was the first of the major domestic equity benchmarks to return to positive territory following the March market swoon.
Within the broader technology universe, several sub-groups are standing out, including cloud computing. For example, the ISE CTA Cloud Computing Index entered Monday with a year-to-date gain of 9.54%.
For awhile, the universe of dedicated cloud computing exchange traded funds was sparsely populated, but that's changed over the past couple of years and some of the new additions to the group are performing well this year. Consider some of the following ideas.
Global X Cloud Computing ETF (CLOU)
The Global X Cloud Computing ETF (NASDAQ: CLOU) remains one of the success stories of the thematic ETF realm. At just about 13 months old, the Global X ETF has nearly $597 million in assets under management, indicating there's room for competition and innovation in the cloud ETF space.
CLOU follows the Indxx Global Cloud Computing Index and is a play on “companies positioned to benefit from the increased adoption of cloud computing technology, including companies whose principal business is in offering computing Software-as-a-Service (SaaS), Platform-as-a-Service (PaaS), Infrastructure-as-a-Service (IaaS), managed server storage space and data center real estate investment trusts, and/or cloud and edge computing infrastructure and hardware,” according to Global X.
Recently on a string of hitting all-time highs, including Monday, CLOU is up an impressive 18.82% year to date.
WisdomTree Cloud Computing Fund (WCLD)
The WisdomTree Cloud Computing Fund (NASDAQ: WCLD) is another emerging success story in the cloud ETF arena with nearly $80 million in assets under management after coming to market just last September. WCLD follows the BVP Nasdaq Emerging Cloud Index, which is an equal-weight benchmark.
“Cloud computing has become ingrained in nearly every aspect of our lives by fundamentally altering how we consume, process and share information in the digital age,” according to WisdomTree. “Through our research, WisdomTree believes this trend toward cloud-based solutions offers a compelling, long-term opportunity for investors to gain exposure to one of the most exciting segments of the technology sector.”
Although WCLD is an equal-weight ETF, it's benefiting from high-flying Zoom Video (NASDAQ: ZM) being its top component. That's helping WCLD to a 2020 gain of 24%. The WisdomTree ETF also hit an all-time high on Monday.
First Trust Cloud Computing ETF (SKYY)
The First Trust Cloud Computing ETF (NASDAQ: SKYY) is the fund that got the cloud ETF party started nearly nine years ago and while it's a behemoth compared to its aforementioned rivals with $3.2 billion in assets, it's not necessarily the best fund in this category.
SKYY is a fine idea for investors looking to lean toward the largest cloud companies. Think Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT), among others. Undoubtedly, that helps, but SKYY's performance is restrained by the mega-cap holdings as it's up just 9.5% this year. Of course, that's better than the broader market.
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Gold and tech sectors - >>> As coronavirus splits the market into haves and have-nots, it makes strange bedfellows
MarketWatch
May 15, 2020
By Andrea Riquier
https://www.marketwatch.com/story/as-coronavirus-splits-the-market-into-haves-and-have-nots-it-makes-strange-bedfellows-2020-05-11?siteid=yhoof2&yptr=yahoo
Fellow travelers on the road to market domination?
Gold and high-tech related companies might not seem to have a lot in common. One is a physical commodity, considered one of the world’s oldest and most durable forms of currency, and prized by investors for its safety. The other represents the most modern companies with innovations that help power an economy increasingly structured around “knowledge work.”
Yet investors are flocking to both, at roughly the same pace, this year.
The chart above shows inflows to two exchange-traded funds: the SPDR Gold Shares GLD, +0.58% and the Invesco QQQ Trust QQQ, +0.23%. Each is the oldest, largest, and most liquid ETF in its class. They are, in the words of Jefferies equity analysts, “two unlikely ETFs going in the same direction.”
The correlation isn’t perfect: GLD has seen its assets under management roar 33% higher in the year to date, while QQQ’s increase is up by about 14%, according to Refinitiv data. GLD’s price is up nearly 12%, while QQQ has gained more than 6%.
But the steady upward trajectory for both is noteworthy. There are lots of separate reasons each asset class is churning higher: the biggest names in QQQ, like Amazon.com Inc., Netflix and Microsoft all offer some of the most convincing investment theses for how we’ll live in the post-pandemic world.
And as for gold, investors may still be skittish. “With uncertainty still high, we believe gold will trade at $1,800 per ounce this year,” said Mark Haefele, chief investment officer for UBS AG Global Wealth Management, in a recent outlook.
Analysts at Bank of America last month raised their price target on the yellow metal to $3,000 an ounce from $2,000.
More than anything, though, the market seems to be increasingly split between haves and have-nots, as MarketWatch’s Mark DeCambre explained in a late April deep dive.
In unsettled times, investors remain more comfortable with proven winners, and tech has dominated the past few years of this cycle. So has gold, in its own way, as bond yields fall to all-time lows and global central banks shy away from buying sovereign debt issued by other countries.
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>>> Kodiak Sciences Inc. (KOD), a clinical stage biopharmaceutical company, provides novel therapeutics to treat retinal diseases. The company's lead product candidate is KSI-301, a vascular endothelial growth factor (VEGF)-biological agent that is in Phase I clinical study to treat wet age-related macular degeneration (AMD) and diabetic retinopathy. Its preclinical stage product candidates include KSI-501, a bispecific anti-interleukin 6/VEGF bioconjugate to target inflammation and abnormal angiogenesis in the pathogenesis of retinal vascular diseases; KSI-201, a recombinant mammalian cell expressed dual inhibitor antibody biopolymer bioconjugate for the treatment of wet AMD; and KSI-401, a recombinant mammalian cell expressed antibody biopolymer conjugate for the treatment of dry AMD. The company was formerly known as Oligasis, LLC and changed its name to Kodiak Sciences Inc. in September 2015. Kodiak Sciences Inc. was founded in 2009 and is headquartered in Palo Alto, California.
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>>> Axsome Therapeutics, Inc., a clinical stage biopharmaceutical company, engages in developing novel therapies for central nervous system (CNS) disorders in the United States. Its product pipeline includes AXS-05, which is in the Phase III clinical trial for the treatment resistant depression; Phase II/III clinical trials in agitation associated with Alzheimer's disease; and Phase II clinical trial for the treatment of smoking cessation, as well as for major depressive disorder. The company is also developing AXS-07, which is in Phase III clinical trial for the treatment of migraine; AXS-12 that is in Phase II clinical trial for the treatment of in narcolepsy; AXS-09, which has completed Phase I clinical trial for the treatment of various CNS disorders; and AXS-02, which is in Phase III clinical trial for the treatment of the pain of knee osteoarthritis associated with bone marrow lesions, and for the treatment of chronic low back pain associated with Modic changes. In addition, it is developing AXS-06 that has completed Phase I clinical trial for the treatment of osteoarthritis and rheumatoid arthritis and for the reduction of the risk of nonsteroidal anti-inflammatory drug associated gastrointestinal ulcers. The company has a research collaboration agreement with Duke University for evaluating AXS-05 in a Phase II trial in smoking cessation. The company was founded in 2012 and is based in New York, New York.
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>>> Invisalign maker Align Technology's stock plunges after downbeat outlook, but analysts stay bullish
By Tomi Kilgore
Oct 25, 2018
https://www.marketwatch.com/story/invisalign-maker-align-technologys-stock-plunges-after-downbeat-outlook-but-analysts-stay-bullish-2018-10-25?siteid=bigcharts&dist=bigcharts
Shares of Align Technology Inc. ALGN, -0.38% plunged 18% toward a six-month low in premarket trade Thursday, after the maker of the Invisalign dental product reported better-than-expected third-quarter earnings, but also said average selling prices (ASPs) declined and provided a downbeat outlook. Analyst Richard Newitter at Leerink cut his price target to $320 from $420, but kept his rating at outperform saying the stock selloff is an opportunity to buy. Align said late Wednesday that worldwide ASP was $1,230, down from $1,315 in the second quarter and and from $1,310 in the same period a year ago. Stifel Nicolaus's Jonathan Block cut his price target to $346 from $425, but affirmed his buy rating saying he does not expect a downward spiral in ASPs. The company said it expects fourth-quarter earnings per share of $1.10 to $1.15 and revenue of $505 million to $515 million. As of the end of September, the FactSet consensus for EPS was $1.32 and for revenue was $545.1 million. The stock has tumbled 24% over the past three months through Wednesday, while the S&P 500 SPX, +1.59% has lost 6.7%.
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>>> 10 Boring Stocks Growing Like Weeds
InvestorPlace
Louis Navellier
September 14, 2018
https://finance.yahoo.com/news/10-boring-stocks-growing-weeds-170550082.html
Most investors love a good story — or should I say, a sexy story. In looking for stocks to buy, they like the stories of the companies that are transforming an entire industry or are exploiting a niche that no one even knew existed 20 minutes ago. It’s the rags-to-riches tale, the ground-floor-stock temptation.
But generally speaking, for real, long-term investors, you want a lot more than wings — you want roots. Stocks that are proven. Stocks that have history. Stocks that have been around for decades, even though few people even know that they’re publicly traded.
Even hot-shot tech companies have to grind out their quarterly numbers after all the hype leaves them. Giant growth can be a fickle asset as a company matures, since double- and triple-digit growth is never sustainable in the long run.
These 10 boring stocks growing like weeds will not only endure, but they will thrive. They may not impress your friends on the golf course, but they’ll certainly keep your portfolio heading in the right direction.
SVB Financial Group (NASDAQ:SIVB) is a bank, but it’s a unique kind of bank — the SVB stands for Silicon Valley Bank. It has become kind of a boutique investment bank for some of its customers.
Say you launched a start-up and got bought out for a few million dollars. A customer like you is in a very special place to launch new firms similar to the one that you have already successfully launched. And SIVB can provide that capital to seed those new firms.
And now SIVB is expanding across the U.S. In a tech driven world, this bank has big potential, which is why it’s up 86% in the past year.
IAC/InterActiveCorp (NASDAQ:IAC) is certainly not a name that rolls off the tongue. But behind this imposing name lies some of the most familiar apps that the romantically inclined use regularly.
IAC runs the The Match Group (NASDAQ:MTCH), as in the dating sites Match.com, Tinder, PlentyOfFish and OkCupid. Another division runs home services sites Homeadvisor and Angie’s List. And yet another division runs Vimeo. And it has a publishing segment that run The Daily Beast, Ask.com, Dictionary.com and others.
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The fact is, IAC is an online subscription and advertising-based behemoth. It’s no surprise that IAC stock is up 90% in the past year. The cross-pollination of all these divisions means it is creating a self-sustaining information and entertainment empire for digital natives.
Paycom Software (NYSE:PAYC) is a cloud-based SaaS (software as a service) company that specializes in human capital management software. Basically, that means it outsources most human resources needs from recruitment to retirement.
As small businesses continue to expand, one of the biggest challenges is building out a human resources department. Most business owners know their trade but understand little about the laws and procedures governing HR. And this can impact the scalability of a business. That’s where PAYC comes in. Business owners can contract out this piece of the business and concentrate on what they do best.
PAYC stock is up a whopping 103% year to date, and the momentum is continuing to grow.
Texas Pacific Land Trust (NYSE:TPL) has been around since 1888, when it was created as a holding company when the Texas and Pacific Railway Company was reorganized. It took over 3.5 million acres of land. Now, it manages 888,333 acres of that land.
That’s land that has oil and gas on it. Land that has housing, commercial and government development on it. And all those royalties and rents are managed by TPL.
As the shale boom continues, especially in Texas, TPL is at the epicenter of its boom times.
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TPL is up 86% so far this year and as Texas continues to boom, the stock will grow.
DexCom (NASDAQ:DXCM) was the No. 2 company last year in Forbes’ list of Most Innovative Growth Companies last year. The year before it was No. 4.
The point is, DXCM isn’t just sitting on its laurels, it’s continuing to dominate a growing niche that is dying for better tech.
DXCM makes continuous glucose monitoring solutions (CGM) for diabetics. Sadly, this is a growth business. But up until now, the old monitoring solutions — pricking your finger and putting your blood on a test strip that measures glucose levels on a device — was the only game in town.
There were some CGMs out there, but they have been a bit clunky — and clunky for a child makes it a tough option. DXCM in a game-changer in this sector and now has devices that can be read off an app on your phone or smart watch.
It’s up 148% year to date and has plenty of headroom left.
Callaway Golf (NYSE:ELY) is one of the most well-known brands in golf. From its revolutionary oversized drivers that have now become the standard on the pro tour and the public links to its line of clothes and bags, ELY is a niche brand that has a devoted and diverse following.
While every year, there is hand-wringing about the demise of the sport with younger generations, the numbers show just the opposite. Golfers’ numbers continue to grow. Youth participation is up. And ELY continues to adapt to the new generation of golfers that come along. This is not a stodgy, “clubby” brand. It has always been known for innovation, and that continues to this day.
The fact that the stock is up 64% in the past year is proof enough that ELY is still finding opportunity on and off the course.
Chart Industries (NASDAQ:GTLS) has a classic tag line for a “boring” stock: “You may never use the products we make, but everyone uses the products we make possible.” And that is certainly accurate, if not heart pounding. GTLS makes cryogenic equipment that are used to separate gasses and other compounds out of liquified natural gas (LNG).
This is a crucial phase of “refining” for LNG. And it means that as the economy grows and energy (and materials production) demands grow, so will GTLS.
GTLS stock is up over 110% in the past year and the economy is just getting started, which means so is this stock.
Synalloy Corporation (NASDAQ:SYNL) has been around since 1945, yet it’s likely you’ve never heard of it.
Based in Richmond, Virginia, it makes stainless steel and nickel alloy pipe, liquid storage systems and heavy wall seamless pipes and tubing. Think storage tanks and equipment for oil and gas exploration and production.
SYNL also has a chemicals division that supports the metals, mining, carpet, automotive and other industries.
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The fact is, while it has a core business that has kept it chugging along since the ’40s, it thrives when the economy is expanding — like now. SYNL stock is up over 100% in the past year.
Kimbell Royalty Partners LP (NYSE:KRP) is a relative newcomer to the oil and gas exploration and production (E&P) game in Texas, having organized just a few short years ago.
But if there’s a time to be in the E&P game, this is it. Domestic energy production is booming and the current political climate is getting rid of regulation, so it’s more profitable than ever to be a part of the U.S. energy business.
While KRP has been operating as a private company for nearly two decades, it has truly come into its own recently. As of July, it now holds 11.1 million gross acres in 28 states. It has 84,000 wells on its properties, with 34,000 wells in the Permian Basin alone.
Up 40% year to date, this limited partnership has a bright future. And its 7.5% dividend is a nice addition to the growth.
Ladder Capital (NASDAQ:LADR) is an interesting real estate investment trust (REIT).
Usually REITs own properties and then distribute their after tax profits to shareholders in the form of dividends. While LADR does have a generous 7.6% dividend, it doesn’t derive most of its revenue from leases. It specializes in commercial real estate financing solutions. It is a lender to companies looking to lease properties.
Granted, it has a few properties, but the bulk of its operations are funded by its financing arm. And with a recovering economy, this is a very good spot to be in.
7 Dividend Stocks to Buy Amid This Tough Market Environment
LADR stock is up 26% year to date, and that doesn’t include the dividend. This isn’t hot tech-stock growth, but for a REIT in a unique niche, this is a very tempting total return play for the long term.
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