By Andrea Riquier
It’s the best of times — vaccines are here! — and the worst: the coronavirus death toll is rising , more Americans are losing their jobs and the holiday season is upon us, although without many of the comforts that normally go along with it.
Stocks have zigzagged over the past week as Congress tries to come to an agreement on more relief funds, but the recovery seems to be spreading more broadly throughout the market, including in the price of oil . Biotech ETFs caught a bid as the first vaccines were administered, and clean-energy ETFs took another leg higher as Joe Biden’s presidential win was confirmed by the Electoral College.
That broadening — and lack of one consistent theme — can also be seen in the best and worst performers of the week, as well as the biggest inflows, at the bottom of this newsletter.
Thanks for reading, and stay warm!
Back in October, when Invesco launched the NASDAQ Next Gen 100 Fund /zigman2/quotes/221735701/composite QQQJ 0.00% , some ETF-watchers thought its premise was intriguing. “At some point, the FAANG stocks will stop leading the market and the next wave of companies will potentially step up and replace them,” Todd Rosenbluth, head of mutual fund and ETF research, told MarketWatch at the time .
That’s because QQQJ offers exposure to the 100 second-largest companies in the Nasdaq, letting its “big brother,” Invesco QQQ Trust /zigman2/quotes/208575548/composite QQQ -0.66% , take the 100 largest.
Now, two months later, the “some point” Rosenbluth referenced is here. Early in December, Nasdaq announced changes to the index, and shortly after, Invesco followed by confirming corresponding updates to its funds.
Some 41 new stocks will be added to QQQJ, ranging from cloud companies like NetApp Inc. /zigman2/quotes/209297588/composite NTAP 0.00% to casino operator Caesar’s Entertainment /zigman2/quotes/205281174/composite CZR +1.08% .
The shuffle is a reminder that companies have very different lifespans: some that cycle into the “second-biggest” tier are growing up, but some are being “demoted,” in Rosenbluth’s words. It suggests that “middle child” might be a better analogy than “baby brother.”
To be sure, “demoted” isn’t necessarily a bad thing. The newly-constructed QQQJ is worth a look, in part because it includes so many poster children of the stay-at-home economy, like DataDog Inc. /zigman2/quotes/214127379/composite DDOG -0.62% , DraftKings Inc. /zigman2/quotes/213120645/composite DKNG -1.30% and Etsy /zigman2/quotes/202790087/composite ETSY +0.27% . It just means that with this ETF perhaps more than others, investors need to be sure they understand what’s inside the funds they buy, Rosenbluth said.
The Bitwise 10 Crypto Index Fund /zigman2/quotes/213028640/delayed CH:KEYS +1.12% is, instead, an index fund traded over-the-counter, and made up of 10 different cryptocurrencies, that charges a sizable management fee and trades at a big premium to its net asset value (for a reminder of what that means, here’s some earlier MarketWatch reporting .)
Initial ETF-Twitter response has not been encouraging.
Still, the fund has gathered $176 million in its first four weeks of existence, proof that investors are eager for exposure to crypto.
Sure, there are plenty of clean-energy and renewables ETFs. But this firm thinks it has a new approach: a fund that tracks the entire lifecycle of the “new energy economy.”
The fund, the Blue Horizon BNE ETF /zigman2/quotes/202916395/composite BNE -0.11% , launched December 9.
Blue Horizon Capital’s president, Govind Arora, told MarketWatch that most clean-energy funds focus on the “bookends” of the sector: the initial production, and then the final products, like electric vehicles. Arora and his partner John Mitchell, both energy-industry veterans, wanted to offer investors exposure to the whole process, including things that many investors might not ordinarily think of, like energy storage and the infrastructure that powers energy distribution.
Their professional experience, Mitchell argues, allows Blue Horizon to take a more “holistic” view of the sector.
Beyond the concentration across some specific segments of the clean-energy economy, BNE stands out for its broad exposure. It holds 100 stocks, Mitchell pointed out, more than many other competitors. For example, the SPDR S&P Kensho Clean Energy ETF /zigman2/quotes/206089699/composite CNRG +0.44% has about 40, and the ALPS Clean Energy ETF /zigman2/quotes/204291195/composite ACES +0.36% has 34.
It’s also fairly global, with about 48% of its holdings coming from the Americas, John said. In comparison, about 76% of the Kensho fund’s portfolio comes from the U.S. But the iShares Global Clean Energy ETF /zigman2/quotes/205740995/composite ICLN -0.10% has only about 42% of its portfolio allocated to North American companies.
As previously noted, clean-energy ETFs have been on a hot streak this year in anticipation of a Democratic presidential administration. Many have more than doubled in value throughout 2020.
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