The coronavirus pandemic is having indelible impacts on how we do everything from the shop, conduct business meetings, and make payments. Those shifts are expected to remain in place after the virus is put to rest and those changes could benefit an array of investment strategies, including the ALPS Disruptive Technologies ETF (CBOE: DTEC).
With exposure to 10 equally-weighted disruptive themes, DTEC could prove to be a pivotal holding for investors looking to position for long-term technological shifts. The fund is higher by 9.21% for the month ending June 18, an advantage of about 240 basis points over the S&P 500.
“We are in the early innings of a technology-driven, decade-long investment cycle centered on data and digitalization that allows businesses to gain insights and improve business outcomes,” said Morgan Stanley analysts led by Katy Huberty in a Thursday note. “COVID-19 is a wake-up call to accelerate this digital transformation, as companies with a greater digital presence are showing more resiliency in the wake of the pandemic.”
Dialing Up DTEC
DTEC tracks the Indxx Disruptive Technologies Index, which identifies companies using disruptive technologies across ten thematic areas, including Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics, and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments.
That composition puts the fund at the front of major changes in technology with fintech being a prime example.
“The market assumes that COVID-19 related adoption of digital payments is a near-term benefit for Payments providers, offsetting some of the consumers spend headwinds. However, digitization of Payments is part of a multi-year secular growth driver in Payments, with COVID-19 as just the latest accelerator,” according to Morgan Stanley.
Goldman Sachs says the tech will continue to be a stellar performer in the short-term, hailing it as an “unrivaled market leader” thus far this year in a CNBC report. On the opposite end of the spectrum, Goldman Sachs forecasts that the energy sector would languish the most.
Other technology funds to consider include the Technology Select Sector SPDR ETF (NYSEArca: XLK) and the Fidelity MSCI Information Technology Index ETF (FTEC).
For more on cornerstone strategies, visit our ETF Building Blocks Channel.
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.