The more things change, the more they stay the same. If you’re trying to figure out why so much of the recent business media you’re reading seems familiar, it’s because we’re stuck. We’re waiting on a fiscal stimulus package like it’s Godot, and we’re pingponging back and forth between exuberance over COVID-19 vaccines and despair over the case counts that continue to grow in the meantime.
Over the past week, investors poured money into travel ETFs , the ultimate “reopening trade,” and into copper funds , perhaps the ultimate economic-expansion play. But by Wednesday, stay-at-home plays were once again winning out over re-opening ones.
With apologies to Yogi Berra, investors are at a fork in the road – and they’re taking it.
Thanks for reading, keep staying safe and healthy, and Happy Hanukkah!
Is the market too saturated with “innovation”-themed ETFs ?
The performance – and pedigree – of one fund suggests not. The Innovator Loup Frontier Tech ETF /zigman2/quotes/204265147/composite LOUP +2.52% has gained nearly 50% in the past three months, even as broad tech indexes /zigman2/quotes/208575548/composite QQQ +1.54% are up only about 9%. Loup is the venture-capital firm founded by tech veteran Gene Munster, among others.
But perhaps more compelling is what LOUP doesn’t have. Its overlap with other popular innovative-tech ETFs is minuscule: about 1% of its holdings are also found in Ark Invest’s benchmark Innovation ETF /zigman2/quotes/204808965/composite ARKK +1.61% , and only about 1.8% of its portfolio is also in QQQ, according to a fund analysis.
That’s according to plan, Munster told MarketWatch. “The purpose of the ETF is to find a set of less-known companies weighted for revenue growth. We try to be thoughtful about nonconsensus ideas.”
That strategy gels with Munster’s background and his work at Loup Ventures, which invests in frontier tech companies – but he makes a good case that the present moment calls for a strategy like LOUP’s.
“We spend a lot of time looking at early-stage tech,” Munster said. “We also spend time looking at FANG. What is clear to us is that performance around FANG is understandable but not sustainable. We refer to a fracturing of FANG: Apple may be a good one to continue to own, but some of the stocks are not going to be able to turn in the same performance. The ideal customer for this is an investor who recognizes that what has worked in the past won’t work in the future. We need to define new areas of tech growth.”
LOUP holds only 30 positions, including some well-known names like Pinterest Inc. /zigman2/quotes/211319641/composite PINS +2.00% and Snap Inc., /zigman2/quotes/205087158/composite SNAP +1.86% , as well as some lesser-known ones like Trimble Inc. /zigman2/quotes/206026592/composite TRMB +1.09% It’s also global, with only about 60% of the portfolio coming from the U.S., and rebalanced quarterly.
Like Ark’s Cathie Wood, who thinks humanity is on the cusp of five different innovation platforms at once , for the first time in over a century, Munster also sees us nearing a historical pivot point.
“We’re up this acceleration curve in tech,” he said. LOUP also looks at several disruptive themes, he said: artificial intelligence, computer perception, robotics, autonomous vehicles, virtual reality, and mixed/augmented reality.
“We measure transformation based on revenue growth. That is one lesson we’ve learned over investing for 20-plus years. In tech, if you’re not growing, you’re not an investible theme.”
Cboe Global Markets /zigman2/quotes/208166986/composite CBOE +0.05% is now the second-largest primary listings venue for exchange-traded products in the U.S., the company said in early December, after what it calls “record gains in new listings” in 2020. In the year to date, Cboe has captured 35% of all new product launches in the market and now lists more than 400 ETPs in the U.S.
Was it “the biggest ETF trade in history?
$7 billion left the Vanguard S&P 500 ETF /zigman2/quotes/201209218/composite VOO +1.23% on Tuesday, according to Bloomberg News. Industry sources, like Eric Balchunas, think it was likely a case of Merrill Lynch advisers rebalancing their model portfolios away from large-cap U.S. stocks.