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2 Forward-Looking Growth ETFs For Long-Term Portfolios 

Published 02/10/2021, 04:40 AM
Updated 09/02/2020, 02:05 AM

Growth stocks have been one of the catalysts of the recent rally in global stock markets. A growth stock typically increases revenue and earnings at a faster rate than its peers. They tend to operate in newer industries, like technology, where there is significant potential to expand their business. Growth stocks can offer juicy returns as part of a long-term portfolio.

There are plenty of companies, as well as exchange traded funds (ETFs), that could be appropriate for growth-oriented investors. Today, we'll discuss two that could appeal to a wide range of investors.

1. ETFMG Prime Cyber Security ETF

Current Price: $62.84
52-Week Range: $29.02 - $64.36
Dividend Yield: 1.03%
Expense Ratio: 0.60% per year

The ETFMG Prime Cyber Security ETF (NYSE:HACK) invests in global firms that provide cybersecurity solutions. Such businesses usually offer hardware, software, consulting and services to defend against cybercrime. Currently, 76.4% of the companies in HACK come from the US, followed by Israel (7.3%), UK (3.9%), Japan (3.6%) and Canada (3.5%).

HACK Weekly

2020 brought increased digitalization into many aspects of our lives. Sharing a vast amount of data online, however, also means increased fraud, cybercrime, and vulnerabilities for individuals and businesses.

Recent metrics highlight:

"The global cybersecurity market was valued at $156.24 billion in 2020 ... [and] is expected to be worth $352.25 billion, with an annual growth rate of 14.5%, by 2026."

Therefore, cybersecurity has become an important growth sector. HACK, which includes 60 holdings, tracks the returns of the Prime Cyber Defense Index. Since its inception in November 2014, assets under management have reached $2.3 billion.

In terms of sub-sectors, Systems Software has the highest weighting with 57.8%, followed by Information Technology Consulting & Other Services (10.8%), Application Software (9.1%), Communications Equipment (8.6%), Aerospace & Defense (5.1%) and others. The top 10 holdings comprise about 28% of the funds.

Canada-based enterprise security software and Internet of Things (IoT) company BlackBerry (NYSE:BB); tech giant Cisco (NASDAQ:CSCO), whose cybersecurity offerings focus on detection, investigation and remediation; Palo Alto Networks (NYSE:PANW), which provides an enterprise cybersecurity platform; Sumo Logic (NASDAQ:SUMO), which offers cloud-based log management and analytics services; and the highly-regarded content delivery network Cloudflare (NYSE:NET) lead the names in the roster.

Most businesses realize it might be only a matter of time before a sophisticated cyber-attack threatens their operations. Thus, we can expect more spending levels to prevent such malicious attacks, which would bode well for ETFs like HACK.

Over the past year, the fund is up more than 40%. It hit a record high in recent days. A potential decline between $60 and $57.5 would mean a better entry point into the fund.

2. Global X Millennials Thematic ETF

Current Price: $41.11
52-Week Range: $16.61 - $41.29
Dividend Yield: 0.28%
Expense Ratio: 0.50% per year

Millennials typically make up the generation born between 1981 and 2000. The Global X Millennials Thematic ETF (NASDAQ:MILN) invests in businesses that are likely to benefit from the spending habits of millennials. Stocks are selected on several criteria, such as demographics and consumer purchase data on this section of the population.

MILN Weekly

Recent research led by Venu M. Garikapati of the Georgia Institute of Technology, Atlanta, Georgia, highlights:

“In 2015, the millennial generation (or Gen Y) became the largest population segment in the United States. With their increasing presence and clout in the marketplace and workplace, it is not surprising that considerable attention is being paid to millennials’ priorities, lifestyle preferences, environmental values, technology adoption, activity, travel and housing choices.”

MILN, which has 81 holdings, tracks the Indxx Millennials Thematic Index. The fund started trading in May 2016 and currently has about $158 million in net assets.

The fund's top five holdings are the commerce ecosystem and payment processor Square (NYSE:SQ); online payment platform PayPal (NASDAQ:PYPL); Snap (NYSE:SNAP), the company behind the social media app Snapchat; transportation network company Uber Technologies (NYSE:UBER), which is well-know for its ride-hailing app; and audio-streaming service Spotify (NYSE:SPOT). They make up around 20% of the ETF.

In the past 12 months, MILN returned more than 51% and hit an all-time high on Feb. 9. Given the recent run-up in price, short-term profit-taking in many of the names that make up the fund is possible. Yet, those investors who want to buy a fund that focuses on Millennials' spending habits might want to keep the fund on their radar screens.

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