- Online Everything – Work from home, delivery services, petcare, home goods etc..
- Home Entertainment – Movies, Gaming, Social Media
- Biotechnology –
- Online Stock Trading – capital markets
- Cleaning and Healthcare Products
The virus is devastating to the economy in most of the world and yet there are bright spots to focus on as an advisor and investor. Unfortunately there are millions unemployed at the moment but as always, I believe in the American culture and will focus on the positive areas while the current areas that are struggling rebuild.
Portfolio of ETFs
Building a portfolio using the above industries takes a few screens and some creativity.
Industry 1. Online Retail – This one immediately points to Amazon but there are several others to consider. Wayfair, Overstock, eBay, Carvana, CarMax, Shopify, Alibaba, 1800 Flowers, Chewy, Grubhub, Etsy, Stamps.com, and many many more. Easy way to grab a few of these names is through a few ETFs – XWEB, ONLN, XSW, IBUY, FDN and MILN.
2. Home Entertainment. Netflix and Activision may come to mind initially. Others are Electronic Arts, Comcast Xfinity, Dish Networks, and Disney. ETFs – XLC and VOX pretty much take care of this sector.
3. Biotech – THere are over 400 stocks in this industry group according to SP data. The easy one to use is IBB. Others to consider are BBH and XBI.
4. Online Stock Trading – Names like Charles Schwabb, TD Ameritrade and eTrade come to mind. Don’t forget Interactive Brokers. Since there are other benefactors to this group like the ETF providers that are public you can use the capital markets ETF to capture these names. KCE looks to be the most direct ETF to use.
5. Cleaning and medical products – Wash your hands take on a new meaning here, names like Clorox, Proctor and Gamble, Johnson and Johnson and Ecolab will surely be top of the list. While not very exciting, they offer stability, good dividends and perhaps some safety in this turbulent market. These also fall into the staple category. So XLP and XLV are a sure way to benefit from this new germaphobe trend. VDC and FBT are two others to consider as well.
The above areas are covered through over 16 ETFs. There are overlaps of course, but that is to be expected. Unless you’d like to build a portfolio of individual stocks, in other words, your own ETF, the ETFs above can be the best way to achieve the industry exposure highlighted. Below is the list and our current ratings:
| Ticker | ETF Name | Rating |
| FDN | First Trust Dow Jones Internet Index Fund | Very Bullish |
| IBUY | Amplify Online Retail ETF | Very Bullish |
| ONLN | ProShares Online Retail ETF | Very Bullish |
| XSW | SPDR S&P Software & Services ETF | Very Bullish |
| BBH | Vaneck Vectors Biotech ETF | Bullish |
| FBT | First Trust NYSE Arca Biotechnology Index Fund | Bullish |
| IBB | iShares Nasdaq Biotechnology ETF | Bullish |
| KCE | SPDR S&P Capital Markets ETF | Bullish |
| MILN | Global X Millennials Thematic ETF | Bullish |
| VOX | Vanguard Communication Services ETF | Bullish |
| XBI | SPDR S&P Biotech ETF | Bullish |
| XLC | The Communication Services Select Sector SPDR Fund | Bullish |
| XWEB | SPDR S&P Internet ETF | Bullish |
| VDC | Vanguard Consumer Staples ETF | Neutral |
| XLP | The Consumer Staples Select Sector SPDR Fund | Neutral |
| XLV | The Health Care Select Sector SPDR Fund | Neutral |
Let’s eliminate the obvious duplications by looking at the Neutral ratings first. I’ll remove XLV and XLP and keep VDC since it has a lower expense ratio but is still Neutral.
Then let’s eliminate one of the online ones. My preference is ONLN, lower expense, and a more concentrated portfolio. Both are Very Bullish but ONLN has a higher percentage of Bulls to Bears because of its concentration.
I’ll eliminate XSW and XWEB in favor of FDN even though FDN has a higher expense ratio you are in a more concentrated allocation and performance is slightly better because of that. Also, these are not exactly the same but I’m getting the desired exposure in FDN and it has high AUM and Liquidity.
I’ll lean toward IBB in this sector given the nature of the industry, it tends to be more volatile and I’d prefer a wider universe. IBB is a lower expense and offers 6 times the amount of stocks, and the performance is inline with FBT, BBH and XBI even though both FBT and XBI are equally weighted they do show stronger performance. BBH is closely ranked to IBB but offers a smaller number of stocks in its portfolio.
So with those quick comparisons, I was able to cull the herd to 8 positions from 16 and still achieve the exposure to the industries that are doing well in this current environment.
| Ticker | ETF Name | Rating |
| FDN | First Trust Dow Jones Internet Index Fund | Very Bullish |
| ONLN | ProShares Online Retail ETF | Very Bullish |
| IBB | iShares Nasdaq Biotechnology ETF | Bullish |
| KCE | SPDR S&P Capital Markets ETF | Bullish |
| MILN | Global X Millennials Thematic ETF | Bullish |
| VOX | Vanguard Communication Services ETF | Bullish |
| XLC | The Communication Services Select Sector SPDR Fund | Bullish |
| VDC | Vanguard Consumer Staples ETF | Neutral |
I’m looking at this as an equal weight portfolio used as a satellite to your core offering. You might use it as a differentiator to talk about the current environment and how to benefit from it without excessive risk. I have 8 ETFs here that represent 591 stocks. Very diverse and focused on the areas where we might continue to find alpha in this market.
Pete Carmasino is Managing Director at PortfolioWise, an ETF ratings system powered by Chaikin Analytics. Pete has over 25 years in the capital markets industry. He previously ran his own RIA firm for several years where he created his own ETF model strategy. In prior roles, Pete was a High Net Worth Advisor and Institutional Sales Trader.
Follow Pete on Twitter @carmasino