Advisors in Focus- January 4, 2021

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.

TrackStarIQ Data

RANKTOP ETFS – BY ALL FAs (Total Traffic) Last WeekTickerTOP ETFS BY FAs w/ AUM>$1B (Total Traffic) Last WeekTickerETF CATEGORIES SPOTLIGHT- PRECIOUS METALS (Total Traffic) Last Week ETF CATEGORIES SPOTLIGHT- TECHNOLOGY EQUITIES (Total Traffic) Last Week
1SPDR S&P 500 ETFSPYVanEck Vectors Gold Miners ETFSPYGLDXLK
2Invesco QQQQQQSPDR S&P 500 ETFGDXSLVSMH
3ARK Genomic Revolution ETFARKGInvesco QQQQQQIAUHACK
4iShares Silver TrustSLViShares Russell 2000 ETFIWMAAAUCLOU
5VanEck Vectors Gold Miners ETFGDXiShares Russell 1000 Growth ETFIJHGLDMSOXX
6ARK Innovation ETFARKKiShares Core S&P Mid-Cap ETFVWOGLTRFIVG
7Direxion Daily S&P 500 Bull 3X SharesSPXLiShares MSCI Emerging Markets ETFEEMSGOLPRNT
8ARK Web x.0 ETFARKWARK Genomic Revolution ETFXLFBARCIBR
9iShares Russell 2000 ETFIWMAberdeen Standard Physical Precious Metals Basket Shares ETFACESPPLTVGT
10ProShares Ultra VIX Short-Term FuturesUVXYInvesco WilderHill Clean Energy ETFNRGUPALLSKYY
11SPDR Gold TrustGLDFirst Trust NASDAQ Clean Edge Green Energy Index FundVYMSLVOXSD
12Technology Select Sector SPDR FundXLKSPDR S&P MidCap 400 ETFAMLPUSVIGV
13Global X Silver Miners ETFSILARK Innovation ETFJETSSIVRIHAK
14iShares S&P 500 Value ETFIVEAmplify Transformational Data Sharing ETFIPOGLDIBUG
15iPath Series B S&P 500 VIX Short-Term Futures ETNVXXAlerian MLP ETFMDY PSI
16VanEck Vectors Semiconductor ETFSMHInvesco Solar ETFTAN QTEC
17Consumer Discretionary Select Sector SPDR FundXLYiShares Core U.S. Aggregate Bond ETFQYLD IPAY
18SPDR Dow Jones Industrial Average ETFDIANorth Shore Global Uranium Mining ETFUUP FINX
19iShares Edge MSCI Min Vol USA ETFUSMVSPDR S&P 600 Small Cap ETFCLIX
20iShares Gold TrustIAUXtrackers Harvest CSI 300 China A-Shares FundPTH

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%)

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