Advisors in Focus- November 16, 2020

Good Monday morning all! This is the second week in a row market participants sat down at their desks, or whatever setup their home office brings, to see a positive development on the vaccine front. Moderna (MRNA) just produced results for its Phase 3 trial that outshined the impressive Pfizer (PFE) results from last week. MRNA saw an efficacy of 94% in its data and the vaccine candidate will be more reliable to store and distribute. Given the recent rise in cases that have disrupted holiday plans, this news, while not changing the immediate future, is more than welcome. The key question for Financial Advisors is how have these recent vaccine developments impacted portfolio allocation? Let’s take a look at areas your peers researched last week.

  • Trivia Question: What year did commercial jet service begin? Extra points for the airline and type of plane flown (Answer below).

Over the past couple of weeks, we have seen FAs exercising a little more caution, searching for steadier returns via income in the dividend and interest yield plays. Emerging markets have been another theme in search activity. However, last week we saw some value ‘Post Covid’ plays come into focus. Leading the way and debuting on the list at #8 on Top ETF searches by All FAs is the 3x bull Aerospace and Defense ETF (DFEN). This leveraged ETF seeks a return that is 300% of the Dow Jones U.S. Select Aerospace & Defense Index (DJSASDT) in a single day. The top holdings in the index are the usual suspects with Lockheed Martin (LMT, 18.6% weighting), Raytheon Technologies (RTX, 17.4%) and Boeing (BA, 9.3%) representing nearly 45% of this ETF.

TOP ETFS – BY ALL FAs (Total Traffic) Previous WeekTickerTOP ETFS BY FAs w/ AUM>$1B (Total Traffic) Previous WeekTickerTOP INDUSTRIES BY ALL FAs (Total Traffic) Previous Week TOP ETF CATEGORIES BY ALL FAs (Total Traffic) Previous Week
SPDR S&P 500 ETFSPYVanEck Vectors Gold Miners ETFGDXBiotechnologyLarge Cap Growth Equities
Invesco QQQQQQSPDR S&P 500 ETFSPYDrug Manufacturers – Specialty & GenericLeveraged Equities
VanEck Vectors Gold Miners ETFGDXInvesco QQQQQQAuto ManufacturersTechnology Equities
ProShares UltraPro Short QQQSQQQFinancial Select Sector SPDR FundXLFSoftware – ApplicationPrecious Metals
SPDR Dow Jones Industrial Average ETFDIAiShares Russell 2000 ETFIWMDrug Manufacturers – GeneralAll Cap Equities
iShares Russell 2000 ETFIWMSPDR S&P Regional Banking ETFKREInternet RetailMaterials
SPDR Gold TrustGLDiShares MSCI Emerging Markets ETFEEMCredit ServicesLeveraged Volatility
Direxion Daily Aerospace & Defense Bull 3X SharesDFENiShares Core S&P Mid-Cap ETFIJHInternet Content & InformationAlternative Energy Equities
ProShares Ultra SilverAGQInvesco DB US Dollar Index Bullish FundUUPDiagnostics & ResearchSmall Cap Growth Equities
ARK Innovation ETFARKKGlobal X Lithium ETFLITSemiconductorsHealth & Biotech Equities
Energy Select Sector SPDR FundXLEGlobal X Cloud Computing ETFCLOUEntertainmentEnergy Equities
ProShares Ultra VIX Short-Term FuturesUVXYiShares Silver TrustSLVSoftware – InfrastructureIndustrials Equities
iShares Silver TrustSLVDirexion Daily S&P Oil & Gas Exploration & Production Bull 2x SharesGUSHAerospace & DefenseFinancials Equities
Financial Select Sector SPDR FundXLFDirexion Daily Gold Miners Bull 2X SharesNUGTConglomeratesAsia Pacific Equities
iShares MSCI Emerging Markets ETFEEMARK Innovation ETFARKKElectrical Equipment & PartsSmall Cap Blend Equities
Technology Select Sector SPDR FundXLKGlobal X FinTech Thematic ETFFINXSpecialty RetailVolatility
ProShares UltraPro QQQTQQQVanEck Vectors Oil Services ETFOIHConsumer ElectronicsLarge Cap Blend Equities
iPath Series B S&P 500 VIX Short-Term Futures ETNVXXSPDR Dow Jones Industrial Average ETFDIAOil & Gas E&PGovernment Bonds
Invesco Solar ETFTANARK Fintech Innovation ETFARKFSpecialty Industrial MachineryChina Equities
iShares Select Dividend ETFDVYGlobal X U.S. Preferred ETFPFFDAirlinesOil & Gas

Shares of DFEN have rallied approximately 64% in the month of November, pushing from $9 to the $15 area. There are a few issues with DFEN, most notably the high expense ratio which is 1.03%. There is also the usual time/decay that exists with these leveraged ETFs. FAs looking for steadier returns may want to look at the iShares U.S. Aerospace & Defense ETF (ITA) which offers a lower expense ratio at 0.40%. While it will not provide the same leverage, it tracks similar names with RTX, LMT, and BA representing 42% of the portfolio.

Other names of interest include:

  • AGQ- Silver has been on the list the past couple of weeks. The AGQ is a 2x leveraged ETF for SLV. The ETF has been chopping sideways between $22-24. Given the research we would keep this name on the radar to see if it can break out of that channel.- 
  • XLE- This joined the FA research list last week and has moved up from #16 to #11. As FAs look for rotation trades the energy space has certainly been a key area. Strong economic data from China will provide a further boost to the troubled sector.

Trivia Answer- On May 2, 1952, the British Overseas Aircraft Corporation began the world’s first commercial jet service with the 44-seat Comet 1A, flying paying passengers from London to Johannesburg.

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