ETF Wrap: Have a heart, and Bezos in an ETF


Welcome to the first ETF Wrap in months that doesn’t have existential dread as its guiding principle.

There was plenty of news, of course — Jeff Bezos stepped down to spend more time with his money, New Yorkers got hit with snow and demanded everyone else hear about every single flake, and Italy is going to do “whatever it takes” by summoning “Super Mario” to lead it out of political and economic crisis.

But that was all refreshingly normal — 2019ish, you might say.

That allows us a little space to reflect back on the market moves of the week. Redditors were in charge, once again, with silver funds
SLV,
-2.67%

among the biggest gainers and GameStop
GME,
-28.23%

plays among the biggest losers. But there were some intriguing inflows into international funds as well (see below.)

Energy ETFs rallied along with the oil price, bank ETFs jumped as the yield curve steepened, and all in all things look perfectly vanilla, even if some investors still need to be convinced the reflation is for real this time.

Thanks for reading, as always.

Do founders do it better? Maybe, as this ETF suggests

Jeff Bezos’ announcement that he plans to step aside as Amazon.com Inc. CEO made for an interesting thought experiment. Which big companies still have their founders at the helm — and how do they perform compared to companies whose founders have stepped aside?

One unique ETF has some answers.

The Global X Founder-Run Companies ETF
BOSS,
+0.80%

is a collection of about 100 stocks that are just what the name says. Even for seasoned stock-watchers, the history behind the holdings can be a bit of a trip down memory lane.

That makes for a portfolio that’s surprisingly diverse, with about 32% of its holdings in technology, and sizable slugs in just about every other sector, from financials to discretionary to health care to real estate.

It’s also made up of a surprising number of winners. “These are many of the superstars of 2020,” said Todd Rosenbluth, CFRA’s head of ETF and mutual fund research, of the fund’s top ten holdings, which includes cloud-computing darling ZScaler Inc.
ZS,
+1.18%
,
streaming-media pioneer Roku
ROKU,
+0.56%
,
and touchless-payment provider Square Inc.
SQ,
+4.10%
.

Many of the companies lower on the list of holdings are equally impressive over longer periods of time, such as NVIDIA Corp.
NVDA,
-0.38%
,
which has returned 1,874% over the past five years, and Ubiquiti Inc
UI,
+2.23%
,
which is up 998%.

“It seems there may be a connection between founder-led companies and innovation,” Rosenbluth told MarketWatch.

That’s all made for a great run for the ETF, which gained 50% in 2020. The one drawback? It’s attracted only $10 million so far, raising questions about how long it might be around.

Global X “has had more success with more targeted products,” Rosenbluth said. “The investor audience has not found this ETF despite its record.”

Exchange-traded sundries
  • One of the world’s most storied mutual funds is getting ETF-ified. Fidelity Investments this week will launch four actively-managed, less-than-fully transparent ETFs, including one modeled after its record-breaking Magellan Fund. The others are: Fidelity Growth Opportunities ETF, Fidelity Real Estate Investment ETF, and Fidelity Small-Mid Cap Opportunities ETF. The ETFs will be run by the same portfolio managers as their mutual fund counterparts and disclose holdings every 30 days with a 30-day delay.

  • S&P Dow Jones Indices announced two new indexes, the S&P MidCap 400 ESG Index and the S&P SmallCap 600 ESG Index. Together with the existing S&P 500 ESG Index, the company now offers ESG versions of its three headline U.S. stock indexes that make up the S&P 1500 Composite, covering 90% of U.S. market capitalization.

Is there an ETF for that?

Investors who want to do well by doing good have lots of options, ranging from environmental strategies to funds that address social justice issues.

Now there’s an ETF that wants to take those principles to a novel area: health care.

The IQ Healthy Hearts ETF
HART,
+0.11%

launched in January as the first “Dual Impact” ESG ETF from IndexIQ. It offers exposure to companies involved in the treatment of cardiovascular disease, like Abbot Laboratories
ABT,
+0.27%

and Johnson and Johnson
JNJ,
+0.47%

and those supporting healthy, active lifestyles, such as Nike Inc.
NKE,
+1.39%

and General Mills Inc.
GIS,
+0.37%

“We decided to create the strategy in alignment with the American Heart Association to try to address the social issues around heart diseases, particularly among the underserved communities that have been vulnerable to it,” said Sal Bruno, IndexIQ’s CIO.

Bruno thinks the way the fund straddles consumer-discretionary names and those in the health-care sector will make it appealing to many investors. But it may have special resonance now, Bruno said in an interview.

“It’s timely now because February is American Heart Month,” Bruno said. “And thanks to COVID, people may be realizing how fragile life is.”

IndexIQ’s parent company, New York Life Investment, will contribute to the American Heart Association’s Social Impact Fund.

Visual of the week

The graphic shows a stochastic oscillator, a technical indicator popular among chartists. Katie Stockton, founder of Fairlead Strategies, made the chart for MarketWatch. She explains: “When markets rally, they often generate an “overbought” condition that is measured by a stochastic oscillator. When this indicator rolls over from above its overbought threshold of 80%, it tends to be associated with corrective price action. These overbought downturns are usually followed by several weeks of consolidation. With this in mind, this week’s overbought downturn is a near-term headwind from a technical perspective.”

Read next: The ETF space race heats up with one giant leap from a star manager

Weekly rap
Top 5 gainers of the past week

ETFMG Prime Junior Silver Miners ETF
SILJ,
-3.71%
13%

Global X Cannabis ETF
POTX,
-0.55%
12.3%

AdvisorShares Pure US Cannabis ETF
MSOS,
+1.07%
11.7%

Global X Silver Miners ETF
SIL,
-3.21%
11.4%

Amplify Transformational Data Sharing ETF
BLOK,
+0.31%
11.2%

Source: FactSet, through close of trading Wednesday, February 3, excluding ETNs and leveraged products

Top 5 losers of the past week

Wedbush ETFMG Video Game Tech ETFGAMR

-18.6%

SPDR S&P Retail ETFXRT

-16.5%

Invesco S&P SmallCap 600 Revenue ETF RWJ

-12.6%

Invesco S&P SmallCap Consumer Discretionary ETFPSCD

-12.5%

Invesco S&P SmallCap Value with Momentum ETF
XSVM,
-0.03%

-11.77%

Source: FactSet, through close of trading Wednesday, February 3, excluding ETNs and leveraged products

Top 5 biggest inflows of the past week

iShares Silver Trust
SLV,
-2.67%
$2.92 billion

JPMorgan BetaBuilders Developed Asia ex-Japan ETF
BBAX,
-0.29%
$1.32 billion

JPMorgan BetaBuilders Japan ETF
BBJP,
-0.05%
$1.21 billion

iShares iBoxx $ High Yield Corporate Bond ETF
HYG,
+0.15%
$938.2 million

JPMorgan BetaBuilders Europe ETF
BBEU,
-0.08%
$734.2 million

Source: FactSet, through close of trading Wednesday, February 3, excluding ETNs and leveraged products

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