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5 ETF Teardowns: What's Under the Hood?

By Zacks Investment ResearchStock MarketsSep 16, 2021 05:30AM ET
5 ETF Teardowns: What's Under the Hood?
By Zacks Investment Research   |  Sep 16, 2021 05:30AM ET
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Professional investors and fund managers have formal, quantitative screening processes to pick stocks.

And we can all learn to assemble portfolios with the same precision by using stock screeners that fit our investment goals, risk tolerance, and time horizons.

At Zacks, we have over a dozen proprietary screens to help you find top stocks with earnings momentum across value and growth spectrums.

But another interesting way I try to get new investors on board with stock screening is by looking under the hood of "thematic" ETFs. I've often found that investing in a new ETF inspires new research in its individual holdings, and their prospects in that industry.

In today's video, I take a look at five different ETF themes and what's inside each of them...

Amplify Seymour Cannabis ETF CNBS: This might be one of the better low-risk ways to play this emerging space. With nearly 40 holdings, including bigger weightings in Tilray (NASDAQ:TLRY), Canopy, and Village Farms, the ETF also offers exposure to many smaller companies that can spur further research.

When I first took a look at this one, I was surprised to see such large cash holdings. But then I reviewed my data source after checking in with our resident ETF expert, Neena Mishra.

She directed me straight to the Amplify website for accurate holdings info. When in doubt, don't use a secondary source if you can go right to the ETF sponsor home. Looking closer at the holdings, I like the diversification and risk/reward in CNBS, 50% off of its highs.

Global X Cybersecurity ETF BUG: Most investors know of the first cybersecurity ETF, HACK, which split the industry into two segments: developers of cybersecurity hardware or software, and providers of cybersecurity services. HACK uses a modified equal-weighting scheme.

Well BUG offers a new approach with concentration in the top names and innovative companies, like Zscaler (NASDAQ:ZS), Fortinet (NASDAQ:FTNT), Palo Alto Networks (NYSE:PANW), and Crowdstrike which together make up nearly 30% of the fund.

As I show in the video, their charts and performance run very similar, but you can buy BUG today with AUM of $870 million at $32 per share if you like the concentration approach. HACK has AUM of $2.4 billion and trades at $64, and they both have nearly the same weighted-average market cap of around $18 billion.

iShares Cloud 5G and Tech ETF IDAT: Just launched in June, IDAT targets global digital infrastructure technology providers that benefit from having significant exposure to the intersection of cloud computing and 5G.

The ETF tracks the Morningstar Global Digital Infrastructure & Connectivity Index and uses a 2.5% equal-weight approach with Fortinet, Marvell (NASDAQ:MRVL), NVIDIA, and Datadog (NASDAQ:DDOG) some of the bigger positions as they've rallied strongly this year.

For instance, Fortinet is 5% of the fund after its 100%+ surge in 2021. For investors who don't want to own many individual technology stocks, and don't want the FANG exposure of the Nasdaq 100, IDAT offers a compelling way to play the connected future.

Emles Alpha Opportunities ETF EOPS: Here's another new ETF that offers answers to the question "Where will your money grow when the Tech bubble pops?" EOPS has had a lot of good answers lately like RH (NYSE:RH), Kohl's (NYSE:KSS), and Signet Jewelers (NYSE:SIG).

And I recently spoke with the fund manager, Nathan Miller, about his approach to picking great value stocks and beating the market without holding any technology stocks...

Finding Value in a Sea of Bubbles: Stocks to Win When the Cloud Bursts

Here's how I open the podcast...

What if you could combine the best of hedge fund strategies, including short-selling and active management, with a safer value approach to stock-picking?

And what if I told you that a particular such strategy has clobbered the market for nearly a decade -- all while holding absolutely zero technology stocks?

Miller ran strategies for the likes of Citadel and RBC Capital before formalizing his quantitative approach to deep value in 2012. Be sure to catch our 40-minute chat to hear how he weighs companies based on industry dominance and fat, sustainable margins.

Global X Uranium ETF URA: Uranium has apparently become a hot commodity of late and here was how my colleague Dave Bartosiak explained it last week...

Part of the reason is on the demand side, coming from a fund that’s aggressively buying up the physical market. Earlier this year, investment firm Sprott launched its Physical Uranium Trust. According to the company, the firm has managed to stockpile over 24 million pounds of uranium.

Compare this pile of the physical commodity to the spot market where something like 92.2 million pounds traded during the entirety of the year 2020. Today, Uranium futures are trading at $40.25 a pound, up from the March 2020 lows in the high $20s.

The move in the underlying commodity has helped stocks in companies related to the industry. The Global X Uranium ETF (URA) has been on fire lately. The ETF is up over 58% YTD and 106% over the last twelve months.

In the video, I look at some of the holdings -- half are Canadian -- that have made big moves in just the past few weeks as the Reddit WallStreetBets crowd started amassing their troops for an offensive. My son has made like 40% in a few of the names, as he left dear old dad in the dust.

But I've been raising cash anyway since I'm looking for a pullback to buy as the market weakens and rolls over. You can get my view here...

September Swoon Targets: Where to Buy the Dip

Kevin Cook is a Senior Stock Strategist for Zacks Investment Research where he runs the TAZR Trader portfolio.

Zacks Names "Single Best Pick to Double"

From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.

You know this company from its past glory days, but few would expect that it's poised for a monster turnaround. Fresh from a successful repositioning and flush with A-list celeb endorsements, it could rival or surpass other recent Zacks' Stocks Set to Double like Boston Beer (NYSE:SAM) Company which shot up +143.0% in a little more than 9 months and Nvidia (NASDAQ:NVDA) which boomed +175.9% in one year.

Free: See Our Top Stock and 4 Runners Up >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Global X Uranium ETF (URA): ETF Research Reports

Amplify Seymour Cannabis ETF (CNBS): ETF Research Reports

GLBLX CYBRSEC (BUG): ETF Research Reports

Emles Alpha Opportunities ETF (EOPS): ETF Research Reports

iShares Cloud 5G and Tech ETF (IDAT): ETF Research Reports

To read this article on click here.

Zacks Investment Research
5 ETF Teardowns: What's Under the Hood?

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5 ETF Teardowns: What's Under the Hood?

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