Thematic investing is becoming increasingly popular. The technology sector has been on the rise since the outbreak of the coronavirus pandemic early in the year and some of the biggest beneficiaries have been e-commerce operators and companies that facilitate remote working. However, the public health crisis has shed a bright light on the importance of having exposure to disruptive technologies and business innovations in general that are likely to change the ways people live, communicate, and do business.
CNBC recently reported that after a year underscored by massive growth in thematic ETFs, that corner of the industry looks like it can keep up the pace in 2021 as investors search for narrower ways to play certain trends.
Here is a quick look at four ETFs that investors should keep an eye on because we believe they stand to deliver exceptional performance in the near future: Innovator IBD 50 ETF (FFTY), ALPS Disruptive Technologies ETF (DTEC), ARK Genomic Revolution ETF (ARKG) and KraneShares Electric Vehicles and Future Mobility Index ETF (KARS).
Innovator IBD 50 ETF (FFTY)
FFTY is composed of the 50 leading U.S.-listed stocks with aggressive growth characteristics designed to generate long-term capital appreciation. The ETF seeks to track the investment results of the IBD 50 Index. The index is Investor's Business Daily's signature investing tool, targeting companies that are generating outstanding profit growth, big sales increases, wide profit margins, and a high return on equity.
FFTY has an MSCI ESG Fund Rating of BBB based on a score of 5.16 out of 10. The ETF has $201.3 million in AUM and an expense ratio of 0.80%. Although the fund does have international exposure, 87% of its assets are in the United States. The fund has an exposure of 3.5% to companies based in Switzerland and 2.9% to companies in Taiwan.
The fund is exposed to various industries, with information technology leading the way with a 59% weighting. The ETF has exposure of 16% and 12% to Consumer Discretionary and Healthcare sectors, respectively. The top three holdings of the fund are Etsy Inc (ETSY), Advanced Micro Devices Inc (AMD) and Teradyne, Inc. (TER), with weightings of 3.8%, 3.7% and 3.6%, respectively.
With a year-to-date gain of 17.1%, FFTY closed yesterday’s trading session at an all-time high of $40.68. Despite witnessing a net outflow of $2 million in the past month, the ETF is up 8.2% during the same period.
How does FFTY stack up for the POWR Ratings?
A for Trade Grade
A for Buy & Hold Grade
B for Peer Grade
A for Industry Rank
A for Overall POWR Rating.
It is ranked #25 of 45 ETFs in the Large Cap Growth ETFs group.
ALPS Disruptive Technologies ETF (DTEC)
DTEC tracks the investment results of the Indxx Disruptive Technologies index, which is composed of global all-cap companies that enter traditional markets with new digital forms of production and distribution and are likely to disrupt an existing market or value network. The fund seeks an equally weighted exposure among 100 companies through 10 disruptive themes – Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments.
DTEC has an MSCI ESG Fund Rating of A based on a score of 6.47 out of 10. The ETF currently has AUM of $152.2 million and an expense ratio of 0.50%. The fund also pays an annual dividend of $0.14, translating to a yield of 0.31%. Though DTEC is a global fund, it has a 69% weighting to domestic companies, followed by a 5.2% and 4.7% exposure to Japan and the United Kingdom, respectively.
DTEC has more than 13% exposure to the Clean Energy & Smart Grid sector. This is followed by the Mobile Payments, and Internet of Things sectors, with 11.7% and 10.5% weightings, respectively. The top three holdings by the fund are Xinjiang Goldwind Science & Technology Co. Ltd. (listed on the HKEX), Brooks Automation Inc. (BRKS) and SolarEdge Technologies Inc. (SEDG), with the weights 1.7%, 1.5% and 1.4%, respectively.
DTEC has gained 37% so far this year to close yesterday’s trading session at $44.16. The ETF is up 8% in the past month and has witnessed net inflows of $10.6 million in the same period. DTEC is currently trading just 4.4% below its 52-week high of $46.20.
DTEC’s prospects are also apparent in its POWR Ratings, which give it a “Strong Buy” rating. It also has an “A” for Trade Grade and a “B” for Industry Rank. It is ranked #39 of 42 ETFs in the Consumer – Focused ETFs group.
ARK Genomic Revolution ETF (ARKG)
ARKG is an actively managed fund that targets companies involved in the genomics industry. The ETF spans multiple sectors and geographies seeking companies that are best positioned to profit from advancements in energy, automation, manufacturing, materials, and transportation. The fund invests in companies that develop, produce, or enable targeted therapeutics, bioinformatics, stem cells or molecular diagnostics.
Genomics companies seek to codify how biological information is collected, processed, and applied by reducing guesswork and enhancing precision, restructuring health care, agriculture, pharmaceuticals, and enhancing human quality of life. The ETF is uniquely designed and thus tracks no underlying index. ARKG has an MSCI ESG Fund Rating of B based on a score of 2.71 out of 10. The ETF has $3.05 billion in AUM and an expense ratio of 0.75%. It also paid a dividend of $2.11, yielding 2.96%.
96% of the ETF’s holdings are in U.S. healthcare-related companies, with biotechnology leading the way with a nearly 67% weighting. The ETF also has a thematic exposure of 23.5%, 17% and 13.7% to Molecular Diagnostics, Beyond DNA and Gene Therapy, respectively. The top three of the 51 holdings by the fund are Crispr Therapeutics AG (CRSP), Arcturus Therapeutics Holdings (ARCT), and Pacific Biosciences of California (PACB) with weightings of 8%, 7.6% and 7%, respectively.
ARKG closed yesterday’s trading session at $94.68, with a year-to-date gain of 182.5%. The ETF witnessed massive net inflows of $1.16 billion in the past month and has returned 27.8% in the same period. Moreover, ARKG is currently trading just 6.4% below its 52-week high of $101.18.
ARKG is rated “Strong Buy” in our POWR Ratings system. It also holds an “A” in Trade Grade, Buy & Hold Grade, Peer Grade and Industry Rank. It is ranked #6 of 38 ETFs in the Health & Biotech ETFs group.
KraneShares Electric Vehicles and Future Mobility Index ETF (KARS)
KARS seek exposure to global stocks that are involved in the production of electric vehicles or other initiatives to enhance future mobility. The fund tracks the Solactive Electric Vehicles and Future Mobility Index that focuses on companies engaged primarily in electric vehicle production, autonomous driving, and lithium and/or copper producing sub-industries.
KARS has an MSCI ESG Fund Rating of A based on a score of 5.94 out of 10. The ETF currently has AUM of $76.7 million and an expense ratio of 0.70%. KARS also pays an annual dividend of $0.44, which translates into a 1.15% yield.
In terms of geographical exposure, KARS is heavily weighted towards the United States, which it accords a 46.2% weighting. The portfolio also has a 20% and 15% exposure to China and Germany, respectively. The top three of the 59 holdings by the fund are Tesla, Inc (TSLA), NIO Inc. (NIO) and Daimler AG, with the weightings of 3.8%, 3.5% and 3.4%, respectively.
KARS closed yesterday’s trading session at $38.83, with a year-to-date gain of 64.8%. The ETF has seen huge momentum this year and is up 12.8% in the last month. The fund also witnessed a net inflow of 32 million in the same period. Moreover, KARS is trading just 4.3% below its all-time high of $40.59.
KARS’ POWR Ratings reflect a promising outlook. The ETF is rated a “Strong Buy” with an “A” for Trade Grade and Buy & Hold Grade, and a “B” in Industry Rank. Within the 107 ETFs Global Equities ETFs group, it is ranked #32.
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FFTY shares were trading at $40.90 per share on Wednesday afternoon, up $0.22 (+0.54%). Year-to-date, FFTY has gained 17.77%, versus a 16.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Sidharath Gupta
Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies.
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