Nearly seven months into 2022, plenty of investors by now know that growth and technology stocks are trailing value fare and that names with the disruptive growth label are really struggling.
Still, the long-term case for innovative growth investing remains intact. In fact, it may be more compelling today owing to growth stock valuation retrenchment, indicating that opportunity is available with exchange traded funds such as the Goldman Sachs Future Tech Leaders Equity ETF (GTEK).
GTEK is actively managed and fully transparent. The former trait is advantageous when it comes to disruptive growth investing because indexes feature constraints that can damp the potency of this strategy. Additionally, as an active fund, GTEK can allocate to a broader lexicon of disruptive growth opportunities instead of being holdings-level dependent.
“In our view, traditional cap-weighted benchmarks are over-concentrated in a few names and are backward-looking, allocating too much capital to past winners and leaving investors underexposed to potential future winners,” noted Goldman Sachs Asset Management (GSAM).
Specific to GTEK, while the fund is concentrated in terms of both number of holdings (59) and sector exposure (technology accounts for 78.6%), the ETF is neither dependent on mega-cap stocks nor excessively allocated to a small amount of names.
GTEK’s top 10 holdings combine for 27.8% of its weight. Conversely, a traditional cap-weighted tech ETF is likely to allocate more than that to just Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). Said another way, GTEK, more so than index-based and old guard counterparts, can position investors to capitalize on tectonic technological shifts.
“We are also experiencing an exceptional acceleration in the adoption rates of many key tech innovations, which are still in the very early days of long-term secular growth,” added GSAM. “However, we believe there is a fundamental disconnect between where most investors are positioned in tech and where we see the most promising potential opportunities over the next decade.”
As noted above, an effective avenue for capturing those opportunities is to reduce dependence on mega-cap stocks. As such, GTEK only holds companies with market values of below $100 billion at the time of inclusion. Additionally, the ETF further puts the size factor on the side of investors by having the flexibility to add mid- and small-cap names to its portfolio.
While many funds purport to have exposure to tomorrow’s leaders and in reality are heavily allocated to past winners, GTEK presents investors with the opposite, more attractive proposition by allocating to tomorrow’s potential stars today.
For more news, information, and strategy, visit the Future ETFs 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.