Don't Expect a Post-Pandemic Letdown for This Fintech ETF | ETF Trends

Whether its with work-from-home stocks or streaming entertainment equities, with the economy reopening, there are increasing concerns that some of the investments that benefited most from the coronavirus shutdown are suddenly vulnerable.

Fintech and the ARK Fintech Innovation ETF (NYSEARCA: ARKF) are certainly benefiting from the desire to stay out of banks and conduct financial transactions online, among other factors. The actively managed ARKF is up 22.33% year-to-date, but don’t expect air to come out of fintech’s sails even as American’s get out of the house.

“A global boom in e-commerce has been one of the few positive business stories to emerge from the coronavirus pandemic. Listed payment gateways Adyen NV, PayPal Holdings Inc., and Square Inc. are in the perfect position to capitalize on it,” reports S&P Global Market Intelligence.

ARKF Will Thrive

Square is ARKF’s largest holding at a weight of almost 12%. In fact, the fund features the largest exposure to the payment processor and Cash App purveyor among all ETFs. PayPal Holdings and Adyen combine for about 6.6% of ARKF’s lineup.

“The share prices of all three have soared during the pandemic, and this strong run is likely to continue even after lockdowns ease, according to industry insiders,” according to S&P Global Market Intelligence. “The coronavirus has catalyzed a major shift in consumer behavior, with in-store sales falling and online transactions taking center stage. For many consumers, especially those who have tried e-commerce for the first time, the change in their buying habits could be permanent, they said.”

Some market observers believe changes in consumers’ behavior, which were apparent before the virus, are merely being hastened by the COVID-19 pandemic and that online is where it’s at for retailers – a theme that’s expected to be sticky for years to come. However, integral to boosting the e-commerce thesis over the long haul are reducing challenges in the industry’s economics and scalability.

Shopping and consumer trends are changing as more buyers rely on the convenience of online retailers to quickly and easily meet their discretionary needs. As the retail landscape changes, investors can also capitalize on the trend through ETFs that target the e-commerce segment as well as fintech funds like ARKF. Demographic trends are driving those shifts.

“Many investors will have viewed shares in Adyen, PayPal, and Square as a defensive play during the pandemic, but all three should maintain their run of strong performance on the stock market in the longer term, according to Claudio Alvarez, London-based partner at GP Bullhound, a fintech investment and advisory firm,” reports S&P Global Market Intelligence.

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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.