Bet on BLKC for Exposure to Some of the Best Financial Stocks

The Invesco Alerian Galaxy Blockchain Users and Decentralized Commerce ETF (BLKC) surged nearly 142% in 2023. That made it one of 2023’s best-performing thematic ETFs.

Not surprisingly, much of the upside delivered by BLKC in 2023 was attributable to rallying cryptocurrency. That included bitcoin prices, and a significant run-up in large-cap technology stocks. Those factors could be at play again this year. That would be good news for BLKC. However, investors shouldn’t overlook the ETF’s nearly 21% weight to financial services stocks.

The financial services sector is typically viewed as a value destination. But the S&P reclassification of various sectors last year brought more growth names, including some BLKC holdings, into the space. However, it could be a mix of BLKC’s old- and new-guard financial services holdings that could support the ETF this year.

Banks, Others Could Boost BLKC

Several traditional money center banks are found among BLKC holdings. That’s a good thing, because one of those names is Dow component JPMorgan Chase (JPM). The firm is widely viewed as the highest-quality large domestic bank.

“JPMorgan also boasts a Morningstar Capital Allocation Rating of Exemplary. Management has made smart investment decisions. For example, the firm avoided the mortgage-backed securities that afflicted many other banks during the global financial crisis, while investing wisely elsewhere,” according to Morningstar.

Among the new additions to the financial services sector that could be supporters of BLKC upside in 2024, credit services providers Mastercard (MA) and Visa (V) merit attention. That duo represents 2.71% of the ETF’s roster.

“Payment networks such as Visa V benefit, unsurprisingly, from a network effect,” wrote Morningstar senior analyst Brett Horn. “The more consumers that are plugged into a payment network, the more attractive that payment network becomes for merchants, which in turn makes the network more convenient for consumers, and so on.”

The research firm acknowledged a similar sentiment is applicable to Mastercard. It pointed out that both companies have wide moats via the network effect and cost advantages. Bank of America (NYSE: BAC), which accounts for 1.45% of BLKC’s portfolio, is another traditional bank stock that could boost the ETF this year.

The second-largest domestic bank behind only JPMorgan Chase “is one of the top deposit-gatherers and a leader in retail mortgages, home equity lines of credit, and small-business lending. It also has one of the largest online retail brokerages and largest advisor forces through Merrill Lynch Wealth Management,” concluded Morningstar.

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