Markets are in the midst of giving up some early gains as we kick off the 2021 trading period. It was a relatively light weekend of news but one story caught the market’s attention. This was the release of a phone call President Trump made to the Georgia Secretary of State in regard to the election process. We will see what the political fallout is from the call, but it has put the Georgia elections front and center. Early polls have the two Democratic candidates holding small leads which could indicate the Democrats would be able to flip the Senate. This could lead to a change in tax policies with President-elect Biden previously stating he would take a look at the capital gains tax as a way of generating revenue. This uncertainty is leading to some early profit taking.
- Trivia Question- What were the top 5 performing ETFs of 2020? (Answer below)
In today’s newsletter we wanted to focus on the tech space. The S&P Information Technology sector enjoyed a strong run in 2020 as the group was up 42% in 2020 compared to 16% for the S&P. This week, we will get some early insight into the tech picture when Micron (MU) reports its November-end Q1 numbers Thursday after the close. We are still two weeks away from the kick off of Q4 earnings, but MU results should help set the tone for earnings expectations. In addition, we have the annual Consumer Electronics Show which runs from January 11-14 in an all-digital format. These two events will keep an early focus on tech.
|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- PRECIOUS METALS (Total Traffic) Last Week||ETF CATEGORIES SPOTLIGHT- TECHNOLOGY EQUITIES (Total Traffic) Last Week|
|1||SPDR S&P 500 ETF||SPY||VanEck Vectors Gold Miners ETF||SPY||GLD||XLK|
|2||Invesco QQQ||QQQ||SPDR S&P 500 ETF||GDX||SLV||SMH|
|3||ARK Genomic Revolution ETF||ARKG||Invesco QQQ||QQQ||IAU||HACK|
|4||iShares Silver Trust||SLV||iShares Russell 2000 ETF||IWM||AAAU||CLOU|
|5||VanEck Vectors Gold Miners ETF||GDX||iShares Russell 1000 Growth ETF||IJH||GLDM||SOXX|
|6||ARK Innovation ETF||ARKK||iShares Core S&P Mid-Cap ETF||VWO||GLTR||FIVG|
|7||Direxion Daily S&P 500 Bull 3X Shares||SPXL||iShares MSCI Emerging Markets ETF||EEM||SGOL||PRNT|
|8||ARK Web x.0 ETF||ARKW||ARK Genomic Revolution ETF||XLF||BAR||CIBR|
|9||iShares Russell 2000 ETF||IWM||Aberdeen Standard Physical Precious Metals Basket Shares ETF||ACES||PPLT||VGT|
|10||ProShares Ultra VIX Short-Term Futures||UVXY||Invesco WilderHill Clean Energy ETF||NRGU||PALL||SKYY|
|11||SPDR Gold Trust||GLD||First Trust NASDAQ Clean Edge Green Energy Index Fund||VYM||SLVO||XSD|
|12||Technology Select Sector SPDR Fund||XLK||SPDR S&P MidCap 400 ETF||AMLP||USV||IGV|
|13||Global X Silver Miners ETF||SIL||ARK Innovation ETF||JETS||SIVR||IHAK|
|14||iShares S&P 500 Value ETF||IVE||Amplify Transformational Data Sharing ETF||IPO||GLDI||BUG|
|15||iPath Series B S&P 500 VIX Short-Term Futures ETN||VXX||Alerian MLP ETF||MDY||PSI|
|16||VanEck Vectors Semiconductor ETF||SMH||Invesco Solar ETF||TAN||QTEC|
|17||Consumer Discretionary Select Sector SPDR Fund||XLY||iShares Core U.S. Aggregate Bond ETF||QYLD||IPAY|
|18||SPDR Dow Jones Industrial Average ETF||DIA||North Shore Global Uranium Mining ETF||UUP||FINX|
|19||iShares Edge MSCI Min Vol USA ETF||USMV||SPDR S&P 600 Small Cap ETF||CLIX|
|20||iShares Gold Trust||IAU||Xtrackers Harvest CSI 300 China A-Shares Fund||PTH|
We put our ETF Category Spotlight on technology equities to highlight some of the ETFs that your Financial Advisory peers are reviewing. Here are some of the ETFs that caught our attention:
- ETFMG Prime Cyber Security (HACK)- This ETF tracks an equal-weighted index of companies actively involved in providing cybersecurity. HACK was up 41% in 2020 as Work-from-Home, remote learnings, and ecommerce shopping led to an increased need for cybersecurity. These themes will continue into 2021 and the need for further security will rise as evident by the highly-publicized Solar Winds (SWI) hack. The Expense Ratio is a little high at 0.60% but it is offset by a distribution yield of 1.11%. 84% of the companies in the index are domiciled in the United States with Software and IT making up 90% of the play. Top holdings include: FEYE, CSCO, CYBR, TENB, and PANW. Shares of HACK broke out above the $50-psyche level back in late November but are stalling out around the $58 area. Valuation is rich at 135x Price to Earnings. IHAK and BUG were two other cybersecurity plays that made FA research lists.
- Defiance NextGen Connectivity (FIVG)- The FIVG tracks global equities related to the 5G network. The fund is weighted in four tiers with the first tier, representing 50% of the weighting, comprising companies associated with core cellular networking and satellites. The remaining tiers are cell phone tower/data center REITs, hardware & software, and mobile enhanced broadband modems. The fund was up 29% in 2020. It has a low Expense Ratio of 0.30% and a Distribution Yield of 0.99%. It’s Price to Earnings Ratio is frothy at 59x. The United States is the dominant region, representing 85% of holdings with Semiconductors (35%) having the most industry representation. Top Holdings include: ADI, NXPI, QCOM, XLNX, and KEYS. The chart looks great from a technical standpoint as it has had a nice steady rise since hitting all-time lows back in March of 2020. The ETF broke out above $30 in early November and has been able to hold its gains. This promises to be a key theme in 2021 as the 5G roll out gets underway in earnest.
- Vanguard Information Technology (VGT)- Vanguard IT play but it does represent more of the small- and mid-cap plays in the space. It still is able to keep its expense ratios low, only 0.10%, despite this slight turn in tracking smaller names. The VGT also includes areas not found in most tech ETFs such as credit cards while removing some stalwarts like telecoms and Gaming and internet services companies. Returns in 2021 were 46%, slightly above the 42% returned by the S&P IT sector. Software & IT Services make up 50% of the group. We would note that AAPL and MSFT make up 36% of this ETF (20% and 16%, respectively). Other top holdings include V (3%), NVDA 3%, and MA (3%).
Trivia Answer- #1 ARK Genomic Revolution (ARKG, +185%); #2 Invesco Solar (TAN, +179%); #3 Invesco WilderHill CLean Energy (PBW, +162%); #4 First Trust NASDAQ Clean Energy (QCLN, +149%); #5 ARK Innovation (ARKK, +148%)