GameStop’s Reddit-driven surge is hijacking some ETFs
The spectacular rally in the share price of GameStop (NYSE:GME) this year has not only given nice profits to members of the WallStreetBets Reddit forum, it has also transformed the video game retailer from a micro-cap stock into a large-cap stock. At its peak, GameStop boasted a market capitalisation of approximately USD 24 billion that puts it ahead of firms, such as Take-Two Interactive, Ubisoft, and Square Enix.
GameStop’s unusual surge in size, however, has caused the stock to temporarily dominate a handful of ETFs (Chart 1). Amongst the most affected is the Wedbush ETFMG Video Game Tech ETF (NYSE:GAMR), the only video game ETF that holds GameStop. GameStop’s weighting in GAMR is currently at 10.1% (as of end-February 2021), a significant increase from the 1.9% seen at the start of this year, and is the top holding in GAMR.
Other affected ETFs include: SPDR S&P Retail ETF (NYSE:XRT), Invesco S&P SmallCap Value with Momentum ETF (NYSE:XSVM), Invesco S&P SmallCap 600 Revenue ETF (NYSE:RWJ), Invesco S&P SmallCap Consumer Discretionary ETF (NASDAQ:PSCD), and iShares Micro-Cap ETF (NYSE:IWC).
Chart 1: GameStop’s surge has had an outsized impact on GAMR
For the time being, GameStop will continue to have an outsized weighting in GAMR, at least until demand for its shares dies down or the ETF rebalances. Investors who are seeking exposure to the video gaming industry will be well-served by considering other ETFs instead, such as the Global X Video Games & Esports ETF (NASDAQ:HERO), Roundhill BITKRAFT Esports & Digital Entertainment ETF (NYSE:NERD) and VanEck Vectors Video Gaming and eSports ETF (NASDAQ:ESPO).
(Related article: Beware of this video gaming ETF which holds a high weightage of GameStop after its meteoric rise)
Red-hot Bitcoin hits new record high
2021 has so far been a phenomenal year for Bitcoin investors, with prices almost doubling this year to a high of over USD 57,000 at one point. While it has since given back of these gains, Bitcoin is still up by more than 65% year-to-date (as of 4 March 2021).
Despite its eye-popping rally, Bitcoin remains one of the most volatile securities the world has ever seen. For investors who believe in the future of cryptocurrencies, but are put off by the extreme volatility, investing in the technology that enables the existence of cryptocurrencies, blockchain, could be a viable alternative.
Blockchain ETFs have been a major beneficiary of the surge in Bitcoin prices. Amongst the best-performing blockchain ETFs is the Amplify Transformational Data Sharing ETF (NYSE:BLOK), which delivered a total return of 41.6% for investors year-to-date (in USD terms as of 4 March 2021), trouncing its next best competitor by close to 30 percentage points. Other blockchain ETFs include:
- First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR)
- Siren Nasdaq NexGen Economy ETF (NASDAQ:BLCN)
- Capital Link NextGen Protocol ETF (NYSE:KOIN)
Of these four ETFs, BLOK stands out, not only because of its stellar performance, but also due to the fact that it is the only actively-managed blockchain ETF in the market right now. The other three ETFs run passive index-tracking strategies. Given that blockchain remains a niche segment, active strategies may perhaps be a better option, but whichever choice you go with, ETFs are certainly a suitable and diversified vehicle to test out your investment thesis on the future of cryptocurrencies.
Table 1: Blockchain ETF comparison
|
Name of ETF |
Expense Ratio |
AUM (USD millions) |
Average Daily Volume (‘000) |
Inception Date |
|
Amplify Transformational Data Sharing ETF (NYSE:BLOK) |
0.70% |
1,072.0 |
694.3 |
17 Jan 2018 |
|
First Trust Indxx Innovative Transaction & Process ETF (NASDAQ:LEGR) |
0.65% |
74.57 |
15.5 |
24 Jan 2018 |
|
Siren Nasdaq NexGen Economy ETF (NASDAQ:BLCN) |
0.68% |
286.41 |
108.7 |
17 Jan 2018 |
|
Capital Link NextGen Protocol ETF (NYSE:KOIN) |
0.65% |
25.93 |
14.2 |
30 Jan 2018 |
|
Source: Bloomberg Finance L.P., iFAST Compilations Data as of 4 March 2021 |
||||
Netflix? Disney+? Spotify? How about a streaming ETF?
The COVID-19 pandemic has lit a fire under the streaming industry.
As strict lockdowns and social distancing measures brought the world to a standstill, it has also brought about a surge in online streaming. At this point, it is difficult to tell whether streaming will continue its strong growth in a post-COVID world, but there are reason to believe that it will. As an industry, streaming is still in its formative stages. With consumers gradually switching from traditional content delivery to streaming services, the industry could potentially deliver exponential growth in the next few years.
The challenge to investors, however, is picking the right companies to invest in. Thanks to the likes of Netflix (NASDAQ:NFLX), Amazon (NASDAQ:AMZN), Disney (NYSE:DIS), and Roku (NASDAQ:ROKU), the video streaming space is becoming increasingly competitive. The same competitive dynamics can also be observed in the music streaming space, with industry pioneer Spotify facing constant and growing competition from Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN), and even Alphabet’s (NASDAQ:GOOG, NASDAQ:GOOGL) YouTube Music.
To help investors pick the right stocks in the streaming space, Roundhill Investments recently launched the Roundhill Streaming Services & Technology ETF (NYSE:SUBZ), an actively managed ETF designed to offer investors exposure to the streaming industry. It is currently the only streaming ETF available in the market.
The ETF invests primarily in companies from across the globe that are actively involved in the streaming business, including audio, video, and gaming, as well as companies that create the infrastructure or technology necessary to facilitate streaming. It holds a fairly concentrated portfolio, with 38 stocks (as of 4 March 2021) that includes such names as Tencent Music (NYSE:TME), Netflix (NASDAQ:NFLX), J-Stream, Spotify (NYSE:SPOT), and Roku (NASDAQ:ROKU).
The ETF comes with an expense ratio of 0.75%.
Wilshere Phoenix debuts innovative physical gold ETF
Wilshire Phoenix, a newcomer to the financial services industry, has made its ETF debut with the launch of the Wilshire wShares Enhanced Gold Trust (NYSE:WGLD), a physical gold ETF that can tactically allocate to cash depending on market conditions.
Gold has traditionally been touted as a “safe haven” for those looking for shelter from more volatile investments, like equities. As Warren Buffett puts it, gold is a way of going long on fear. Despite its prominence, gold has often exhibited significant volatility, and WGLD seeks to mitigate that risk.
WGLD allocates to physical gold and cash by utilising a passive, rules-based methodology that automatically adapts to changing market conditions, using the volatility of gold and equity markets (as indicated by the S&P 500 Index). Generally speaking, if the volatility of gold prices is rising, the fund is expected to have a lower allocation to gold, and vice versa. During periods of heightened volatility in equity markets, WGLD is also expected to have a higher allocation to gold.
While WGLD is down by -4.0% since its inception (18 Feb 2021), the ETF has held up relatively well compared to the -4.4% decline in gold prices over the same period. Based on backtested data, the strategy also outperformed gold in 2020, with a total return of 25.8% that is higher than the 25.0% appreciation in gold price.
The ETF comes with an expense ratio of 0.65%, meaning that investors will be paying a 47 basis point premium to access Wilshire Phoenix’s risk-managed approach compared to our recommended physical gold ETF, the SPDR Gold MiniShares (NYSE.GLDM), which has an expense ratio of just 0.18%.
SPACs: Here to stay, or just another investment fad?
Special purpose acqusition companies (SPACs) are one of Wall Street’s latest investment trends.
A record 248 SPACs debuted on US exchanges last year, raising nearly USD 83 billion, according to SPACInsider. The booming SPAC craze has also spread to Asia, with both Singapore and Hong Kong considering the possibility of adding SPAC listings to their markets.
Also known as ‘blank cheque companies’, SPACs are shell companies set up with the sole purpose of raising money through an IPO to eventually acquire another company. The capital raised by the SPAC goes into an interest-bearing trust account until the SPAC finds a suitable acquisition target. A SPAC has to seal a deal within a period of time, typically 24 months of its creation, or the SPAC will be liquidated, and investors get their money back with interest.
It remains to be seen if SPACs are here to stay, or just another investment fad. To be sure, private companies are increasingly evaluating SPACs as a public market exit alternative to traditional IPOs, while the quality of SPAC sponsors has also increased, with the likes of Bill Ackman and Richard Branson amongst the notable names to back SPACs.
Picking the winners of individual SPACs can be a difficult task. Thankfully, for investors who believe in the future of SPACs, three ETFs have emerged over the past few months offering them access to a diversified basket of SPACs.
- Defiance Next Gen SPAC Derived ETF (NYSE:SPAK): SPAK is a passive, rules-based ETF that invests in both US-listed SPACs (40%) and post-deal companies (60%). As SPAK is a market-cap weighted portfolio, its top holdings include some of the largest deals, including DraftKings (NASDAQ:DKNG), which made a successful stock exchange debut via a merger with an SPAC. Of the three available ETFs, SPAK is the only passive fund, and carries the lowest expense ratio of 0.45%.
- SPAC and New Issue ETF (NYSE:SPCX): SPCX is the first actively-managed SPAC ETF to come to market. The fund focuses on SPACs, investing only in the best-in-class SPACs with strong management teams and attractive valuations. As a result, the fund does not have any holdings in post-deal companies. Given that SPCX runs an active strategy, it has a significantly higher expense ratio of 0.95% compared to the passive SPAK.
- Morgan Creek - Exos SPAC Originated ETF (NYSE:SPXZ): SPXZ is the latest SPAC ETF to come to market. Similar to SPCX, SPXZ also runs an active strategy, but the key difference is that SPXZ invests in both SPACs and post-deal companies. The strategy also targets equal weights so no one single holding will have an outsized impact on the portfolio. The fund costs 1% in expense ratio.
An important update on the iShares Hang Seng Tech ETF
On 29 January 2021, BlackRock Asset Management North Asia Limited, the manager of the iShares Hang Seng TECH ETF (HKEX:3067) announced that the fund will cease making new investments in sanctioned Chinese companies from 1 February 2021 onwards.
This is to comply with the executive orders issued by the Trump administration, forbidding all US persons from investing in the securities of companies that are deemed to be Chinese military companies. At the moment, the US authorities have identified 44 companies that it claims have ties to the Chinese military, two of which – SMIC (HKEX:981) and Xiaomi (HKEX:1810) – are held by the ETF.
As a consequence of the restrictions, the weighting of the sanctioned companies within the ETF will deviate from the underlying index, and investors should expect to see the ETF performance diverging from the index i.e. the tracking difference will increase.
Investors who are concerned about the potentially higher tracking difference of the iShares Hang Seng TECH ETF (HKEX:3067) can consider switching to alternatives, such as the ChinaAMC Hang Seng TECH Index ETF (HKEX:3088) or the Lion-OCBC Securities Hang Seng TECH ETF (SGX:HST), for the time being.
(Related article: For all investors of the iShares Hang Seng Tech ETF, here’s an important update you need to know)
New additions to our ETF RSP list
Investors will be pleased to know that we have added eight ETFs to our RSP list over the past month, including the wildly popular ARK Innovation ETF (NYSE:ARKK).
The eight ETFs are:
- Lion-OCBC Securities Hang Seng TECH ETF (SGX:HST)
- Invesco KBW Bank ETF (NASDAQ:KBWB)
- ETFMG Prime Mobile Payments ETF (NYSE:IPAY)
- ARK Genomic Revolution ETF (BATS:ARKG)
- ARK Innovation ETF (NYSE:ARKK)
- ARK Next Generation Internet ETF (NYSE:ARKW)
- ARK Autonomous Technology & Robotics ETF (BATS:ARKQ)
- ARK Fintech Innovation ETF (NYSE:ARKF)
Related articles:
Why Lion-OCBC Securities Hang Seng TECH ETF? Q&A with ETF Issuer Lion Global Investors
Cash is no longer king. Here’s how you can capitalise on the cashless payments opportunity.
Visa and MasterCard: A scale and scope that is almost impossible to replicate
COVID-19 will hurt US bank profitability, but it’s time to buy the banks.
US banks face toughened Fed stress test this year, but most are well-prepared for the worst
Take part in the booming demand for financial services with these global custodian banks
Declaration:
All materials and contents found in this site are strictly for general circulation and informational purposes only and should not be considered as an offer, or solicitation, to deal in any of the funds or products found/identified in this site. While iFAST Financial Pte Ltd ("IFPL") has tried to provide accurate and timely information, there may be inadvertent delays, omissions, technical or factual inaccuracies and typographical errors. Any opinion or estimate contained in this report is made on a general basis and neither IFPL nor any of its servants or agents have given any consideration to nor have they or any of them made any investigation of the investment objective, financial situation or particular need of any user or reader, any specific person or group of persons. You should consider carefully if the products you are going to purchase are suitable for your investment objective, investment experience, risk tolerance and other personal circumstances. If you are uncertain about the suitability of the investment product, please seek advice from a financial adviser, before making a decision to purchase the investment product. Past performance is not indicative of future performance. The value of the investment products and the income from them may fall as well as rise. Opinions expressed herein are subject to change without notice. In respect of any matters arising from, or in connection with the said research analyses or research reports, recipients of the report are to contact IFPL at 10 Collyer Quay, #26-01 Ocean Financial Centre Building, Singapore 049315, or by telephone at +65 6557 2853. Where the report contains research analyses or research reports from a foreign research house and if the recipient of such research analyses or research reports is not an accredited investor, expert investor, institutional investor or an ex-accredited investor, IFPL accepts legal responsibility for the contents of such analyses or reports to such persons only to the extent as required by law. Please note that only certain security(ies) herein are available to all investors, while the rest are only available for certain persons to invest in, such as Accredited Investors (as defined in the Securities and Futures Act) or one who invests at least S$200,000 (or its equivalent currency) per transaction. To qualify as an Accredited Investor, one needs to submit a declaration form and certain relevant supporting documents, according to iFAST’s prevailing policies and procedures.
Please read our full disclaimers on the website at ( https://secure.fundsupermart.com/fsmone/policies/328125/investment-account-terms-&-conditions).
iFAST Financial Pte Ltd (IFPL) (registered address: 10 Collyer Quay #26-01 Ocean Financial Centre Singapore 049315, Telephone: 6557 2000) holds the Financial Advisers Licence issued by the Monetary Authority of Singapore ('MAS') to conduct regulated activities of advising on securities, marketing of collective investment schemes and arranging of any contract of insurance in respect of life policies, other than a contract of reinsurance and the Capital Markets Services Licence issued by the MAS to conduct regulated activities of dealing in securities and providing custodial services for securities. While IFPL has made every effort to ensure the independence of the report's contents, IFPL's nature of business is such that IFPL and its connected and associated entities together with their respective directors, officers and staff may be involved in providing dealing or investment-related services in the abovementioned securities, and have taken or may take positions in the securities mentioned in this report, and may also act as the principal for any buy or sell trades.