By Michael Venuto, Co‑founder & CIO, Toroso Investments
This weekend, many households received a catalogue from Amazon featuring holiday stickers, photos of children’s gifts/toys, and a page to draft a wish list. This bold marketing scheme intelligently omitted one key aspect that catalogues of the past could not: the prices for these goods. The multiple ironies and brilliance of this catalogue are mind blowing. First, Amazon in many ways has replaced the physical book with digital text, but is now sending a physical shopping experience to entice buyers who are unaware of prices. Additionally, this catalogue is reminiscent of the 300-page mailman assassins that Sears and Toys “R” Us sent in October of previous decades. These brick and mortar stores are now almost obsolete, thanks in part to Amazon.
Trends in Influence
Putting these ironies aside, at the ETF Think Tank, we have discussed the impact of COVID-19 on the economy and its acceleration of mega-trend adoption in themes like digital payments, online retail, blockchain and other Work From Anywhere themes. In today’s research note, we explore the relationship between Amazon stock and the ETF ecosystem. We begin with passive influence; ETFs own 5.2% of the outstanding share of AMZN, which is substantially below the 7.0% average for most US equities. The ETF influences on AMZN are also much less than the 13.3% of the shares held by mutual funds. These statistics from the ETF Think Tank’s software suggest that AMZN is not materially impacted by ETF flows or trading.
The Amazon Playlist
Despite being under-owned by ETFs as a percentage of market cap, AMZN is owned by 244 unlevered ETFs. The list below, from ETF Research Center, shows the weights and exposure. The list is quite long, so we will provide a summary of the highlights of AMZN concentration. The biggest weights are in consumer discretionary ETFs, with allocations over 30%. The second largest allocation is in ProShares Online Retail ETF (ONLN) with 22.9% which market cap weights the theme of Retail eCommerce. Lara Crigger from ETF.com recently posted some great analysis on the ONLN and a competitive fund Amplify Online Retail ETF (IBUY). Despite significant differences in concentration and index construction, both of these funds are up over 89% in 2020.
Most investors probably assume Amazon is a technology company; not according to sector ETFs, but it is around 10% weight in the Invesco QQQ Trust (QQQ). From a style perspective, most growth ETFs have AMZN as a sizeable weight. In terms of factors, most multifactor funds are exposed, but also many quality and low volatility factor ETFs allocate to AMZN. Next comes ESG, with almost universal appeal to exclusionary funds like Xtrackers S&P 500 ESG ETF (SNPE), Impact Shares NAACP Minority Empowerment ETF (NACP), and SPDR S&P 500 ESG ETF (EFIV), but also funds that seek good corporate actors, like Goldman Sachs JUST U.S. Large Cap Equity ETF (JUST) and Global X Conscious Companies ETF (KRMA). Finally, many thematic ETFs have exposure beyond the obvious internet and online retail plays; $AMZN is present in 5G ETFs, Gig Economy, Fintech, cloud computing and all four blockchain focused funds.
Speaking of blockchain, join our Get Think Tanked virtual happy hour this Thursday, October 22 at 5 pm EST to speak with Brian Estes, and get his unique perspectives on all things crypto, bitcoin and blockchain related.
Originally published by ETF Think Tank, 10/21/20
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