We have entered the final week of trade in 2020. People around the world will rejoice as we turn the calendar on one of the most difficult years in recent memory. ‘Don’t let the door hit you on the way out’ jokes will be plentiful. Investors have had a, arguably, better year given the amount of liquidity pumped into markets by central banks. Last night, President Trump signed the $900 bln stimulus and omnibus bill which will ease market fears. There is still the potential for Capital Hill to increase the personal check portion of the bill to $2,000 from $600. The bottom line, a potential for the re-inflation trade is a major 2021 theme. With that in mind, we wanted to run the ETF spotlight on materials to help unearth some plays for Financial Advisors.
- Trivia Question- The NYSE had its first million share day on December 15, 1886. When was the last time there was a sub-million trading day on the NYSE?
TrackStarIQ Data
| RANK | TOP ETFS – BY ALL FAs (Total Traffic) Last Week | Ticker | TOP ETFS BY FAs w/ AUM>$1B (Total Traffic) Last Week | Ticker | ETF CATEGORIES SPOTLIGHT- MATERIALS EQUITIES (Total Traffic) Last Week | ETF CATEGORIES SPOTLIGHT- HEALTH & BIOTECH EQUITIES (Total Traffic) Last Week |
|---|---|---|---|---|---|---|
| 1 | SPDR S&P 500 ETF | SPY | SPDR S&P 500 ETF | SPY | GDX | ARKG |
| 2 | Invesco QQQ | QQQ | VanEck Vectors Gold Miners ETF | GDX | SIL | XBI |
| 3 | ARK Innovation ETF | ARKK | Invesco QQQ | QQQ | XME | IBB |
| 4 | VanEck Vectors Gold Miners ETF | GDX | iShares Russell 2000 ETF | IWM | GDXJ | PTH |
| 5 | Direxion Daily S&P 500 Bull 3X Shares | SPXL | iShares Core S&P Mid-Cap ETF | IJH | BATT | FBT |
| 6 | ProShares Ultra VIX Short-Term Futures | UVXY | Vanguard FTSE Emerging Markets ETF | VWO | CUT | XLV |
| 7 | ARK Genomic Revolution ETF | ARKG | iShares MSCI Emerging Markets ETF | EEM | REMX | GNOM |
| 8 | iPath Series B S&P 500 VIX Short-Term Futures ETN | VXX | Financial Select Sector SPDR Fund | XLF | SILJ | |
| 9 | iShares Silver Trust | SLV | ALPS Clean Energy ETF | ACES | LYM | |
| 10 | Consumer Discretionary Select Sector SPDR Fund | XLY | MicroSectors U.S. Big Oil Index 3X Leveraged ETN | NRGU | RING | |
| 11 | Energy Select Sector SPDR Fund | XLE | Vanguard High Dividend Yield ETF | VYM | ||
| 12 | iShares Russell 2000 ETF | IWM | Alerian MLP ETF | AMLP | ||
| 13 | SPDR Dow Jones Industrial Average ETF | DIA | U.S. Global Jets ETF | JETS | ||
| 14 | VanEck Vectors Semiconductor ETF | SMH | Renaissance IPO ETF | IPO | ||
| 15 | SPDR Gold Trust | GLD | SPDR S&P MidCap 400 ETF | MDY | ||
| 16 | Invesco Solar ETF | TAN | Invesco Solar ETF | TAN | ||
| 17 | SPDR S&P Biotech ETF | XBI | Global X NASDAQ 100 Covered Call ETF | QYLD | ||
| 18 | Direxion Daily Small Cap Bear 3X Shares | TZA | Invesco DB US Dollar Index Bullish Fund | UUP | ||
| 19 | Technology Select Sector SPDR Fund | XLK | ProShares Long Online/Short Stores ETF | CLIX | ||
| 20 | iShares Global Clean Energy ETF | ICLN | Invesco DWA Healthcare Momentum ETF | PTH |
There are signs of an improving global economic backdrop. China has played a lead role as it was the first country impacted by the pandemic and is now emerging from its slump. Western Democracies have trailed in performance but vaccine hopes have improved sentiment and outlook. Monetary and fiscal stimulus plans are providing a boost to economic expectations. Meanwhile, companies are finding themselves under invested and with low inventories. In the most recent Bank of America Fund Manager Survey, asked what companies should do with cash, 44% of investors said improve the balance sheet while 42% preferred an increase in capex spend. This was a major improvement in capex expectations from the past nine months. A further push into capex spend can drive the economy to ‘escape velocity’.
The low inventories are key as companies will push for more materials to replenish stock in expectation of rising demands. As these demands increase, the price for raw materials will go higher, providing companies with better margins. Gold is an obvious inflation hedge and the GDX and GDXJ remain heavily researched areas by Financial Advisors. We wanted to take a look at other materials ETFs that have generated interest in your peers.
- Spdr S&P Metals & Mining ETF (XME)- This tracks an equal-weighted index of U.S. metals and mining companies. Steel names make up 45% of this ETF. Top company holdings include HL, CDE, HCC, CLF, NEM, ATI and FCX. The Top 10 weighting is approximately 45% (24 holdings total). The Expense ratio is reasonable at 0.35%. Average Daily $ Volume is $70 mln. Year-to-Date Returns have been 13%, trailing the 16% SPY returns. The ETF has been in a tight consolidation range between $32-34 in the month of December.
- Amplify Lithium & Battery ETF (BATT)- This tracks a market-cap weighted index that invests in global advanced battery material companies that mine and produce lithium, cobalt, nickel, manganese, and graphite. It is geographically diversified with China (30%) making up the largest representation. Auto & Truck, Electric Components, and Specialty & Mining make up 60% of the industrial representation. Largest weightings are in Contemporary Amperex Technology, BHP, TSLA, BYD, and LG Chemical. The Expense Ratio is a little high at 0.59% but it is offset by a distribution yield of 2.33%. Average Daily $ Volume is $1.03 mln. As one would expect, this space has had a good year with a 38% return. It is also expensive as it trades at 262x Price-to-Earnings but that is not surprising given the list of its top components.
- VanEck Rare Earth Metals ETF (REMX)- This tracks an index of global companies that mine, refine, or recycle rare earth and strategic metals. The United States recently granted three companies Defense Department grants to mine for these rare earth materials, an area that has been dominated by China. Not surprisingly, Chinese names dominate this ETF with 30% representation. Australia, which is in the midst of trade disputes with China, is second at 25%. Specialty mining names make up 50% of the weighting. The Top 10 holdings are 60% of the ETF but there are only 21 constituents in total. Another high Expense Ratio at 0.60% but it does provide FAs exposure to an area that can be difficult to invest in under normal circumstances. REMX is attempting to break above the $60 level at the time of this writing.
Trivia Answer- October 10, 1953 was the last time the NYSE saw less than one million of shares exchanged.