Buy Hold Sell: 5 megatrends and the ETFs to play them
In a world of inflation and rising rates, it can be easy to focus on the short-term benefits that cyclical companies may enjoy. But megatrends, those powerful, transformative forces that change and disrupt the way our societies and economies operate, are a fantastic way for investors to get exposure to long-term growth.
One such megatrend is decarbonisation, an area of the market that 62% of Livewire readers told us they would be allocating their capital to in 2022. Other megatrends that are rapidly transforming our society include the aging population, the rise of Web 3.0, and the ever-accelerating move towards digitisation and automation.
Given the challenge of identifying those companies that will ultimately succeed, thematic ETFs have rapidly emerged as a popular way for investors to access these long-term opportunities.
So in this episode, Livewire's Ally Selby was joined by two talented financial advisers - Felicity Thomas from Shaw and Partners and Ben Nash from Pivot Wealth - for their thoughts on five exciting themes for the next decade (and the ETFs that investors can use to play them).
Note: This episode of Buy Hold Sell was shot on Wednesday 13th April 2022. You can watch the video, read an edited transcript or listen to the podcast below.
Ally Selby: Hey, how are you doing, and welcome to Livewire's Buy Hold Sell. I'm Ally Selby and today we're going to be discussing five exciting themes and the ETFs to play them. To do that, we're joined by Ben Nash from Pivot Wealth and Felicity Thomas from Shaw and Partners.
First up, we're talking decarbonization. It was actually the theme that 62% of you said that you would be allocating capital to in 2022. We're going to be talking about VanEck's Global Clean Energy ETF, the ticker is CLNE. It's an interesting one, it actually only invests in 35 global companies. Felicity, I might start on you. Is it a buy, hold, or sell?
Decarbonisation: VanEck Global Clean Energy ETF (ASX: CLNE)
Felicity Thomas (BUY): For me, CLNE is a buy. It's the only ETF that is actually a pure-play green energy ETF. So I think it's quite unique and I believe that the US last year spent a lot of money on climate change, so I think it's going to come into its own.
Ally Selby: It has a management fee of 0.65%. Ben, is it a buy, hold, or sell?
Ben Nash (SELL): It's a sell for me. I think it is extremely niche, and while I do believe in the theme and that the space will grow over time, for me, the lack of diversification just suggests a bit more volatility for investors.
Ally Selby: Is there one that works in decarbonization that you'd recommend instead?
Ben Nash: I think it's an evolving space with sustainability. We keep an eye on the new developments that come through and thankfully a lot are coming onto the market that are giving investors more options in the sustainability space, but at this stage, there's nothing else that I would put in its place. It's just the super-specific nature of that fund that makes me a little bit nervous
Blockchain, cryptocurrencies and Web 3.0: BetaShares Crypto Innovators ETF (ASX: CRYP)
Ally Selby: Okay. Digital currencies: blockchain, Web 3.0. We're going to be talking about the recently launched BetaShares Crypto Innovators ETF. Ben, I'll stay with you. Is it a buy, hold, or sell?
Ben Nash (BUY): This one's a buy from me. I think crypto is a really interesting space, the blockchain technology has so many applications that I think we're only just starting to see that. I think it will just grow and continue to grow. Also, the house always wins, so a lot of the companies that this particular ETF is investing in, they're companies that are not necessarily tied to the price or value of cryptocurrency or other digital assets but instead that make money when they're more and more popular. So I think that it's a huge growth area.
Ally Selby: This ETF actually has smashed ASX trading volume records on its first day of trading. It used to be $8 million as a record, now it's close to $40 million. Felicity over to you, is it a buy, hold, or sell?
Felicity Thomas (BUY): It's another buy from me. It's off 45% from its original initiation price. I really like what Ben said, in that it's the picks and shovels of cryptocurrency in different companies, rather than direct cryptocurrency. You make money on the buyers and sales. So with ANZ and NAB and all the majors getting into cryptocurrency, I think it's here to stay.
Aging population: BetaShares Global Healthcare ETF (ASX: DRUG)
Ally Selby: Next up we have the ageing population. I couldn't actually find a passive ETF for this thematic, so we're going to look at healthcare. We're going to take a look at BetaShares Global Healthcare ETF, the ticker is DRUG. Felicity, over to you. Is it a buy, hold, or sell?
Felicity Thomas (BUY): For me, it's another buy. If you think we're going into a recessionary environment, you want to tilt your portfolio to be a little bit more defensive. Healthcare is defensive and we've got an ageing population globally, so I think it's a really good long-term play
Ally Selby: Over to you, Ben. It Has a management fee of 0.67%. Is it a buy, hold, or sell?
Ben Nash (BUY): It's a buy from me. I think that we're seeing huge amounts of money being spent on healthcare in Australia and globally. The US is one of the biggest global markets and healthcare costs are pretty staggering over there. I think that plus the secondary exposure to the property market makes this one a solid performer for the medium to long term.
Automation and digitisation: ETFS Global Robotics and Automation ETF (ASX: ROBO)
Ally Selby: Next up we're talking automation and digitization, it's a theme that's rapidly accelerated over the past decade. We're going to take a look at ETF Securities' Global Robotics and Automation ETF, the ticker is ROBO. Ben, staying with you, is it a buy, hold, or sell?
Ben Nash (HOLD): Look, this one's a hold from me. I think that looking at the companies that are there, it is hyper niche. Again, I do believe in the industry and the fact that there will be a lot of growth there, but at this stage, the lack of diversification is a bit of a concern
Ally Selby: Over to you Felicity. It has a management fee of 0.69%. Is it a buy, hold, or sell?
Felicity Thomas (HOLD): For me, it's also a hold. I really do like it in the portfolio, but it's trading at 26 and a half times P/E, so it's a little bit expensive at the moment
Battery minerals/materials: ETFS Battery Technology and Lithium ETF (ASX: ACDC)
Ally Selby: Last but not least, we have probably the sexiest topic in the market at the moment, it's battery materials. We're going to take a look at ETF Security's Battery Technology and Lithium ETF. It has an awesome ticker, it's ACDC. Felicity, staying with you. Is it a buy, hold, or sell?
Felicity Thomas (BUY): For me, this is a buy. I really like future-facing commodities and ACDC is a way to get diversified exposure to that kind of theme. The US has also created a 50% electrification target, so I think there's going to be a push there.
Ally Selby: Over to you, Ben. This one actually only invests in 33 companies. It has a management fee of 0.69%. Is it a buy, hold, or sell?
Ben Nash (SELL): It's a sell for me. I think if you look at the performance of this ETF relative to the market and relative to commodity prices over the period, it's probably doesn't seem to be lining up for me and I think it's partly in what you've said - there is a small number of companies. Again, I think that there's a potential in the space and, obviously, more and more demand for this. But at the moment, it just doesn't seem to be there for me.
Ally Selby: Well, I hope you enjoyed that episode of Buy Hold Sell as much as I did. If you did, why not give it a like, and remember to subscribe to our YouTube channel, we have an awesome series on decarbonization coming up in the coming weeks.
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Buy Hold Sell is a weekly video series exclusive to Livewire. In each episode two fund managers give their views 'Buy, Hold or Sell' on five ASX listed companies. Not recommendations, please read the disclaimer and seek advice where appropriate.