Buy Hold Sell: 7 ETFs exposed to structural growth themes

Buy Hold Sell

Livewire Markets

Search queries for exchange-traded funds (ETF) have exploded in 2020, especially on the back of COVID-19. The number of people seeking information on Google for this investment vehicle has popped 88% from this time last year, and queries such as "Investing in ETFs", "Managed funds vs ETFs" and "Vanguard ETFs" are proving particularly popular.

With interest in ETFs abuzz and a strong appetite for growth ideas from readers, Livewire decided it was about time we brought ETFs into the world of Buy Hold Sell. Join Vishal Teckchandani as he talks to investment advisers Charlie Viola of Pitcher Partners and James Whelan from VFS Group.

They sit down to discuss three ASX ETFs which have been delivering sizzling returns in 2020 and then bring four of their own ASX and global ideas offering strong prospects for capital growth right now. Together, we cover hot thematics including healthcare, China, gold, robotics, 5G, US tech and a better way to play Aussie equities than simply buying the ASX 200.

Notes: Watch, read or listen to the discussion below. This episode was filmed on 9 September 2020.

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Edited Transcript

Vishal Teckchandani: Welcome to Buy Hold Sell brought to you by Livewire Markets. My name is Vishal Teckchandani and today we're talking about lucky seven, seven of the top-performing growth ETFs. Joining me on the show today is James Whelan from VFS Group and Charlie Viola from Pitcher Partners. Charlie, let's kick off with you. We've picked a variety of ETFs across different sectors, the first one on the list is the ETF Securities S&P Biotech ETF. Buy, Hold, Sell?


Charlie Viola (Hold): We are probably a Hold, but we take value in Hold. So the S&P Biotech ETF the stock code is CURE so maybe it gives away in the name, so it gives you exposure to US biotech companies. So as the name suggests, it's providing exposure to those companies that do the manufacturing marketing of genetic analysis, etcetera. So for Australian investors, think of CSL and a whole bunch of those types of companies. The reality is that given the high barrier entry, given what's going on in demographics, it's a good place to invest, it's obviously gone up 10 or 15% in the last 12 months or so. So we would probably take a little bit of the capital off the table, but leave your original capital invested. So it's a Hold but only just.

Vishal Teckchandani: Okay, it's a Hold for Charlie. James, what do you reckon? I mean, the healthcare space has been under immense interest this year. We're all praying for a COVID-19 vaccine. Is this a sector where you want to park your money? Buy, Hold, Sell on CURE?

James Whelan (Sell): We're actually going to be a Sell on this one. It was a bit of a... yeah that'll do... For us, it was there. Just technically it looks like it's slipped away a little bit, so sometimes you actually have to look at a chart and think about what it is that you're going to do. Also, the names that are in there aren't specifically the ones that you want to have for where everyone is looking for the next quarter. They're maybe not necessarily the actual ones that are coming to CURE.

James Whelan: There are some amazing ones that do some amazing biotech. So it's in the biotech sub-industry of the healthcare sector and some of those smaller names in there, because you are muddied in, we would probably favour that if you wanted to own a company that was finding a cure for COVID, you could buy that company. This might be one of those times when you actually know those companies that it's going to be doing. Underlying going to this ETF it looks like maybe that with everyone's attention being drawn towards those specific companies, some of that money is flying out of the other guys that it is doing. So I am very sorry it's great ETF but I'm just going to have to give it a Sell today.

VanEck Vectors China New Economy ETF (ASX:CNEW)

Vishal Teckchandani: It's a Sell, okay. Next up on the list is the VanEck Vectors, China New Economy ETF. It's put on a good show, nearly 40% return this year. Buy, Hold, Sell?

James Whelan (Hold): We actually think it's probably got a bit more to do. We're a Hold right now, but if you don't own it yet, have a really good look and put it on your watch list that you want to have. So this ETF is fundamentally sound companies in the new economy of China. So we're talking a tech healthcare consumer discretionary, that side in the Chinese space. We see that China is back in big, bold letters. Simple stats, Chinese domestic hotel occupancy levels are at 70%, that's 70% capacity for hotels; 90% airline travel, so seats are being 90% filled to where they were pre-COVID. China is back in a big way. They wore masks, they didn't shake hands, they took care of the virus, they're fine. They are now open for business. Their economy is back at back in action.

Vishal Teckchandani: Okay, China's open for business but do you want to go long on this ETF?

Charlie Viola (Buy/Hold): Yeah, so if you don't have it, Buy it, if you've got it, certainly Hold it. We like it, equal-weighted 120 best companies in probably the biggest contributor to global growth. For us, it's absolutely a Hold, but certainly a Buy if you haven't got some of it in your portfolio.

BetaShares Global Gold Miners ETF - Currency Hedged (ASX:MNRS)

Vishal Teckchandani: Okay, next up on the list is the BetaShares Global Gold Miners ETF. How hot has gold been this year? This ETF has delivered a nearly 50% return. Buy, Hold, Sell?

Charlie Viola (Sell): It's Sell and it's run away screaming, drop it now, take your money and run for us so absolutely a Sell. So for those of you who don't know what the MNRS ETF does, it's a diverse global portfolio of gold miners. So we've got a really skinny market here in terms of gold miners in Australia whereas obviously in the US there's many more of those. We probably take the view that gold miners are a little bit like mining services companies that, when the commodity goes up in value, what was not once commercial to do is now commercial. But when the market turns or when the commodity price changes, from our perspective it's a bit like being an ice cream vendor with a broken freezer. So no, take the value now and Sell and runaway.

Vishal Teckchandani: Sell and run away, wow, that's as high conviction as you get golden opportunity or golden duck on this ETF?

James Whelan (Buy): This one is great and obviously being the ex Australia, it gives you some really good exposure overseas, Warren Buffett would like a word with you, Charlie; he just took a massive position in a colossal gold miner. The two big names that stood out for me on this ETF: Barrick and Newmont are fantastic. We're a Buy on this one and if it goes down, maybe buy a little more. So, that's where we are. I'm bullish gold, not a gold bug, but I think that miners are a better leverage to the upside on this one and as gold continues to go up, which I believe it will do, the leverage that they show to the upside will shine through in this.

Charlie Viola: And to be clear, we're a buy on gold, but if you want exposure to gold, go and buy gold, don't go and take the risk on the actual miner.

Vishal Teckchandani: No worries, bullion for Charlie and equities for James?

James Whelan: All of it for us!

Vishal Teckchandani: All right, so we did ask our guests to bring two growth ETFs each that offer some good growth ideas for your portfolios. James, what have you got for me?

ETFS ROBO Global Robotics and Automation ETF (ASX:ROBO)

James Whelan (Buy): Well, we like to think of ourselves as specialists in the thematic and growth in tech and so I had to thin out a lot of companies from the herd here. Cybersecurity had to be left out because I can only pick two. ROBO is the one that I picked first and foremost, that's run by ETF Securities, local guys, fantastic ETF provider. It's the future of robotics, automation, artificial intelligence. It's got some access into 5G as well. Well, worth a look, it's the future of work, it's the future of computing, it's the future of everything. If you don't know anything about it, you should, because it's probably going to determine a lot about the way that you live your life as well. So have a good look at ROBO and that's great and that's got things like NVIDIA in it and FANUC, some really good companies in there.

Defiance Next Gen Connectivity ETF (NYSE:FIVG)

James Whelan (Buy): The second one that I choose is a 5G. Now, this is international, it's not locally based. A lot of what I do is international, I'm a global macro guy and the stock code is FIVG. Now Huawei for all that's being said and done, is basically dead. We see that as being left by the wayside, people are pulling their kit out. Amazingly, there are two very, very strong companies that are first and foremost, and have been taking a lot of market share away from them and that would be Ericsson and Nokia. So remember the old phone providers that told you that they're now front and centre to run the world for 5G and a lot of other 5G technology. With the infrastructure build that is coming, if I may go on, with the election and with rebuilding economies, 5G towers have to be built. Because of where it sits on the bandwidth, you need a lot of towers, there's a lot of infrastructure, a whole economy around it will need to be built. All of those companies should benefit from that.

Vishal Teckchandani: Okay, Charlie, what about you? What are some ETF ideas you've got for me today?

BetaShares NASDAQ 100 ETF (ASX:NDQ)

Charlie Viola (Buy): Well, we're an investor in tech, we like big companies, so NDQ for us which is the NASDAQ 100, gives you exposure to all those best tech companies, it covers the disruption space. We believe it picks up all of those themes which will produce growth over the medium to long term and we're long-term investors here, even if we have a client who's 55 or 60 and the time horizon's 30 years. So, we believe in Apple, we believe in Microsoft, we believe in those big NASDAQ-style companies, because they're the ones that are going to get the most market share and have the best fundamentals over the long term.

VanEck Vectors Australian Equal Weight ETF (ASX:MVW)

Charlie Viola (Buy): And for us, the second one is a really nice, simple one for us, MVW which is the VanEck Equal Weighted index. We're broad-based investors, we believe in efficient market theory, we think that over the longterm and James has said it a couple of times that over time the market will go up and we like that equal-weighted index, it covers a number of stocks, but on an equal weighting. So when you're buying it, you're not just buying the Australian market, which has got four banks and a couple of miners in and not very much in everything else in equal weights, the top 78 stocks. So for us, we like it, it gives good exposure to those major industrials, it ensures good exposure to those companies that are actually out there generating revenues and we believe over the longterm, it will produce good growth for investors.

Vishal Teckchandani: Well, if you're looking for growth ideas for your portfolio, then these ETFs may just be your CURE.

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  • Stay tuned for a plethora of interviews over the next week. Charlie and James will return to talk about the best and worst of ETFs on Thursday, and next Monday they'll discuss 5 ETFs to diversify your portfolio with
  • Tomorrow our small-cap fundies Chris Stott from 1851 Capital and Gary Rollo of Montgomery will opine on whether the small-cap market will see a rotation in leaders. See their previous video on 5 small caps chasing big markets here
  • View the full Buy Hold Sell archive here
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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.

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