Whether it’s slower earnings growth or a natural retreat from the massive economic growth fueled by stimulus cash and pent-up demand, many investors are pondering the impact of a slower growth environment.
Slower growth often prompts investors to embrace growth stocks because those companies are delivering above-average earnings and sales growth. Enter the Goldman Sachs Innovate Equity ETF (GINN), which stands as an exchange traded fund that investors might want to evaluate as earnings growth moderates.
“Strong earnings growth is due to the strong economic restart – and the realization of such strength was priced in by higher multiples last year as stocks surged back from the Covid-19 shock,” said BlackRock in a recent note. “We are likely to see earnings growth normalize as activity settles after the powerful restart. Historically high earnings beats are partly due to conservative guidance.”
The $494 million GINN follows the Solactive Innovative Global Equity Index (Net total Return, Unhedged, USD) and has the potential to provide an ideal outlet for investors looking to access above-trend growth as earnings growth ebbs.
The Goldman Sachs exchange traded fund “leverages advanced technology to select and weight companies by a function of ‘thematic beta,’ providing precise exposure to the following themes: Data Driven World, Finance Reimagined, Human Evolution, Manufacturing Revolution, and New Age Consumer,” according to the issuer.
A value fund this is not, but GINN is full of companies with significant earnings power. Think Tesla (NASDAQ:TSLA), Nvidia (NASDAQ:NVDA), and Alphabet (NASDAQ:GOOG), among others. Additionally, no stock commands a weight of more than 2.8% in GINN, indicating that if one particular name delivers poor earnings news, the ETF is unlikely to be punished by those headlines.
With scant single stock risk and a lineup littered with companies with stout top and bottom line growth, GINN could be an ideal way to deal with post-restart blues.
“We believe the bulk of the restart-fueled earnings surge is behind us, and a moderation of earnings growth into next year is to be expected. The restart can only take place once. Yet companies may well continue to exceed earnings expectations, in our view,” adds BlackRock.
GINN allocates almost 52% of its weight to the technology and healthcare sectors — two quality groups with positive earnings momentum. The fund is coming off a gain of almost 6% in October.
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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.