Displaying items by tag: large cap growth

The post-pandemic stable recovery is starting to teeter, and threats to the portfolio are starting to creep in. Investors are now actively turning bearish and moving into cyclical value plays, while others remain optimistic that growth stocks are still the best option. The question isn’t about the future but rather what exposure has the least risk and the best upside in the current environment. The O’Shares Global Internet Giants Index ETF (OGIG) may be an opportunity to invest in growth at a great value.

Riding the Growth-Value Line

OGIG is a rules-based ETF that tracks both quality/value characteristics in internet companies. These companies need to include a majority share of their revenue from either internet commerce or technology services that underpin e-commerce. Internet companies are an obvious signal for growth and OGIG’s biggest holdings include Amazon, Google, and Microsoft from the US; and Tencent, Alibaba Group, and Shopify* from abroad. In addition to growth, the fund optimizes on the most important driver of value: revenue. Over the last three years, revenue is one of the best predictors of returns. As the first quartile of technology stocks nearly doubled the annualized return of the quartile below. Part of what makes this fund so attractive is that the revenue is a prop against future headwinds, but more on that later.

Since the onset of the pandemic, stocks have performed well. The S&P 500** has had a pure return of 94.4% since bottoming out on March 20, 2020 through 9/15/2020, but OGIG has drastically outpaced it. Growing at 153% since that same date, OGIG even dwarfs competitors like the Nasdaq 100 by over 20 percentage points. The primary reason for that is the revenue value factor. This drives a 20% discount in relative price-to-sales ratio compared to the Nasdaq 100 vs. the 3-year average. The other driver is exposure to the fastest-growing technology companies globally in emerging markets, China, and Canada.

The Future Landscape

Investors are worried about the spreading delta variant, weak economic growth, and future inflation, but all of these risks are of little concern for OGIG. E-commerce is driving the success of OGIG, which would only be fueled by a pick-up in the delta variant and has institutionalized itself in the American economy in a return to normal. Weak economic growth is a concern for non-revenue generating companies, but robust revenue generators outpace competitors in tough economic times. Meanwhile it’s the hyper-growth prospects that are concerned about future inflation as they have no current revenue. And besides, the latest inflation data suggests Powell is right about inflation being transitory.

Finally, regulation in China started to spike in July, but the lion’s share of that regulation is already passed. Historically, China has been quick to redact any policies that are a hindrance to its future growth. In fact, China’s regulation is actually providing a solid landscape for the fast-growing tech sector with more assurances moving forward.

Grow and protect with the O’Shares Global Internet Giant ETF.

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[*] Click here to view the funds top 10 holdings.

[**] Definitions:

S&P 500: The S&P 500® is widely regarded as the best single gauge of large-cap U.S. equities and serves as the foundation for a wide range of investment products. The index includes 500 leading companies and captures approximately 80% coverage of available market capitalization.

NASDAQ-100 Total Return Index: The NASDAQ-100 Index is a modified capitalization-weighted index of the 100 largest and most active non-financial domestic and international issues listed on the NASDAQ. No security can have more than a 24% weighting. The index was developed with a base value of 125 as of February 1, 1985. Prior to December 21,1998 the Nasdaq 100 was a cap-weighted index.

Relative Price/Sales Ratio (P/S): The price-to-sales ratio is a valuation ratio that compares a company’s stock price to its revenues.

Before you invest in O’Shares ETF Investments Funds, please refer to the prospectus for important information about the investment objectives, risks, charges and expenses. To obtain a prospectus containing this and other important information, please visit www.oshares.com to view or download a prospectus online. Read the prospectus carefully before you invest.

There are risks involved with investing including the possible loss of principal. Concentration in a particular industry or sector will subject the Funds to loss due to adverse occurrences that may affect that industry or sector. The Funds may use derivatives which may involve risks different from, or greater than, those associated with more traditional investments. A Fund's emphasis on dividend-paying stocks involves the risk that such stocks may fall out of favor with investors and underperform the market. Also, a company may reduce or eliminate its dividend after the Fund's purchase of such a company's securities. Past performance does not guarantee future results. Shares are bought and sold at market price (not NAV), are not individually redeemable, and owners of Shares may acquire those Shares from the Funds and tender those shares for redemption to the Funds in Creation Unit aggregations only, consisting of 50,000 Shares. Brokerage commissions will reduce returns. The market price of Shares can be at, below, or above NAV. Market Price returns are based upon the midpoint of the bid/ask spread at 4:00 PM Eastern time (when NAV is normally determined), and do not represent the returns you would receive if you traded Shares at other times. O’Shares ETF Investments Funds are distributed by Foreside Fund Services, LLC. Foreside Fund Services, LLC is not affiliated with O’Shares ETF Investments or any of its affiliates.

View the standardized performance for OGIG. Expense ratio: 0.48%

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost.

Please note that very strong performance may be due to unusually favorable conditions that are likely not sustainable.

(San Francsico)

There are mixed signals as to how to currently position oneself in the market as news reports are calling many things a good buy, from doubling down on momentum to cyclical value stocks, but Goldman Sachs is bullish on lots of large-cap internet stocks. Amazon, Facebook, Snap, Uber, Lyft, and Expedia all received buy ratings from Goldman’s investment team. They see secular trends in revenue growth and operating efficiencies scaling these companies even larger over the next couple of years. While they don’t consider themselves overly bullish, they see digital advertising being a key lever to push for these companies to have their full upside priced correctly by the wider market. Subscriptions, the creator economy, cloud computing, and augmented reality are all reasons to be fans of large-cap growth, but they are staying away from Airbnb and Twitter. FINSUM: The fed-keeping rates low is very promising for growth companies that are reliant on the credit-frothy economy. But rate moves are also the key risk.

(New York)

Any seasoned market veteran will tell you that today’s hottest thing might very well turn into the epicenter of tomorrow’s crisis. Tech stocks led to the Dotcom crash, structured credit led to the Financial Crisis. Now ask yourself, what is the hottest product of the moment? The answer is simple: ESG stocks. ESG is nebulous as an asset class since it crosses many boundaries, but in reality, a lot of the new ESG AUM has flowed directly into large cap tech stocks. This means that a lot of the buying going on in large cap tech is just de facto ESG buying.

FINSUM: ESG is a surging category and a lot of Dollars are flowing in. Since the term and its actual meaning are still vague, a lot of the money flows into tech, which is almost universally seen as ESG friendly. When might the music stop?

(New York)

There has been rising anxiety of late that the growing assets in ESG stocks have created a valuation bubble in the most popular shares in the category. The idea is that rush into ESG has funneled a ton of capital into a relatively small group of shares, “artificially” inflating valuation. However, the Financial Times argues that there is definitively no bubble in these stocks. In fact, they are not valued any more richly than any average basket of shares. Overall, the average PE ratio of a global basket of ESG stocks is the same for an average basket of all stocks: 14x.

FINSUM: This is actually quite a relieving study, as there have been some very lofty AUM growth figures thrown around lately for ESG. And in case you are nervous, the same metrics/comparison listed above also hold for US/domestic ESG stocks.

There may be a lot of noise around valuations and inflation, but ask yourself a question: do you think the tech sector is going to grow into a bigger part of the economy over the next few years? The vast majority of investors would say yes, and if you are in that camp, then it may make sense to commit a considerable part of your portfolio to the space. Inflation may rise, but the reality is that the fundamentals of the tech sector have been very healthy and have grown nicely. Don’t let short-term noise and anxiety distract from that.

With this in mind, check out O’Shares Global Internet Giants ETF (OGIG). The fund is at the forefront of helping advisors invest opportunistically in companies that are leading the economy’s digital transformation. Which means—you guessed it—these are high growth businesses.¹ The fund’s constituent companies include those in the digital advertising, social media, e-commerce, and cloud services sectors. The average trailing twelve-month revenue growth² for an OGIG³ constituent was 40%, versus 11% for the Technology Select Sector Index, and 22% for the Nasdaq 100⁴.

Over the last twelve months, OGIG outperformed traditional tech indexes by over 40%⁵ (in what was already a fantastic year), which speaks to its rules-based approach’s ability to select high growth, high appreciation stocks. The fund is also a way to invest in global growth, not just the US. If you want to invest in the Internet Giants of the future, look at OGIG.

1. High growth businesses tend to be companies which have grown revenues, cash flows, and earnings faster than the market. Growth companies create value by continuing to expand reinvest their earnings for further expansion.Data as of 3/31/2021

2. Revenue growth is used as a measure of the increase or decrease of a company's sales. High Growth companies and revenue growth refer to the underlying characteristics of the fund's portfolio and does not represent or predict the performance of any fund.

3. Indexes are unmanaged and it is not possible to invest in an index.

4. Source: Bloomberg Finance L.P. Data as of 3/31/2021. Past performance is no guarantee of future results.

5. Bloomberg Finance L.P. Data as of 3/31/2021. Returns for periods more than 1 year are annualized. OGIG Inception Date: 6/5/2018. Investors cannot directly invest in an index. Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost.

6. OGIG Index: O’Shares Global Internet Giants Index.

7. Nasdaq 100: Modified capitalization weighted index of the 100 largest and most active non-financial domestic and international issues listed on the NASDAQ.

8. Technology Select Sector Total Return Index: The Technology Select Sector Index is a modified cap-weighted index. The index is intended to track the movements of companies that are components of the S&P 500 and are involved in the development or production of technology products. The index which serves as a benchmark for The Technology Select Sector SPDR FundXLK, was established with a value of 250 on June 30, 1998.

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. For performance current to the most recent month-end, please visit www.oshares.com/ogig/#performance. Returns beyond 1 year are annualized. The total expense ratio is 0.48%. Click here for the fund's standardized returns.

Shares of the Funds are not individually redeemable and the owners of Shares may purchase or redeem Shares from each Fund in Creation Units only. The purchase and sale price of individual Shares trading on an Exchange may be below, at or above the most recently calculated NAV for such Shares.

Market Price returns are generally based on market value at 4:00PM Eastern time (when NAV is normally determined), and do not represent the returns you would receive if you traded shares at other times. Fund returns assume that dividends and capital gains distributions have been reinvested in the Fund at NAV.

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