This is the time of year when many investors consider the consumer discretionary sector and retail stocks and exchange traded funds. That makes the new Goldman Sachs Future Consumer Equity ETF (GBUY) an idea worth talking about.
Importantly, there’s more to the GBUY story than simple holiday shopping trends. Significant changes in how consumers shop and spend money are afoot, and those trends are likely to prove durable, underscoring possible benefits with GBUY’s active management style.
Consider the intersection of other disruptive technologies, such as artificial intelligence and augmented reality, with online retail. Some passively managed ETFs in this category may not be nimble enough to capitalize on those trends.
The marriage of retail and technology “is now becoming normalized. eCommerce is at an inflection point: Over the next four years, it will grow more than three times faster than physical retail, data from Activate Consulting suggests. This is creating new opportunities and transforming the way brands are marketing and selling their products,” according to BlackRock research.
What makes GBUY unique is that it’s not a dedicated retail ETF. In fact, consumer discretionary is merely the fund’s second-largest sector exposure, though at a weight of 27%. Communication services stocks represent over a third of GBUY’s roster. While that sector has some applications in online retail, it’s also positioned to benefit from other consumer trends, including entertainment.
“Online entertainment is soaring as well. Advancements in high-speed networks and the rise of the internet allow unfettered access to digital content whenever and wherever. And consumers are eating it up: People in the developed world spend more time interacting with their friends on social media and gaming platforms than in real life,” adds BlackRock.
While investors often think of retail as a cyclical space, and with good reason, emerging consumer trends could prove durable, potentially giving GBUY an “all-weather” feel regardless of what’s happening in the broader economy. The stark reality is that the consumer is rapidly evolving, and investments need to keep up with that evolution or risk subjecting investors to lackluster returns. GBUY could allay those concerns over the long term.
“And importantly, these trends are independent of the economic cycle. For that reason, she sees them only gaining in importance over the next several years. Who will be left behind? Companies and industries that have been slow to invest in digitalization,” concludes BlackRock.
GBUY launched on November 9 and already has $8.3 million in assets under management.
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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.