Innovative advances in 5G networks, internet and technology industries provide exchange traded fund investors an opportunity to capitalize on this disruptive growth.
In the recent webcast, 5G, Technology and Internet and How to Invest Today, Sean O’Hara, President, Pacer ETFs Distributors, highlighted the rising investment demand for technology stocks as investors chase after the fastest growing segments of the U.S. markets. The technology-heavy Nasdaq-100 Index has outperformed the S&P 500 so far this year. O’Hara argued that the Nasdaq-100 play is a secular theme that provides investors exposure to companies that have grown their earnings, revenues and dividends since 2003, which have outpaced the growth for S&P 500 companies. Furthermore, looking at the Nasdaq-100 weights, the underweight sectors have underperformed, notably energy and financials, while the overweight exposure to sectors like technology, consumer discretionary and communication services have performed the best.
As a way to better capture this growth opportunity, Pacer has come out with he Pacer Trendpilot 100 ETF (BATS: PTNQ), which tracks the Pacer NASDAQ-100 Trendpilot Index, an smart beta index that incorporates a trend-following strategy to diminish drawdowns during bearish market conditions to help improve the overall, long-term investment returns. The Pacer Trendpilot strategy basically tries to participate in the market when it is trending up, pare back market exposure during the short-term market downtrends, and prevent extended declines by moving to T-bills during long-term market downtrends. Over time, the underlying Pacer NASDAQ-100 Trendpilot Index has produced similar upside captures to the benchmark Nasdaq-100, but the Trendpilot Index has done so with lower volatility and lower max drawdowns.
Additionally, the Pacer Benchmark Data & Infrastructure Real Estate SCTR ETF (NYSEArca: SRVR) may be another way to tap into the expanding telecommunications and internet industries. SRVR tries to reflect the performance of the Data & Infrastructure Real Estate SCTR Index, which is comprised of cell tower REITs, data center REITs, and similar facilities.
“SRVR gives potential investors exposure to the Cloud, 5G and edge computing infrastructures build out without exposure to traditional semi-conductor, software, and hardware companies,” O’Hara said.
“The stability and predictability of SRVR companies’ rental revenues, occupancy rates, and operating costs may reduce the risk of negative surprises and volatility,” he added.
O’Hara argued that while some investors rely heavily on direct technology exposure, Technology Infrastructure offers another way to get exposure. Specifically, the foundation of 5G communications infrastructure includes cell towers, distributed antenna systems and fiber optics. The foundation of cloud computing also includes data infrastructure, notably large data centers. These data centers help drive new cloud data in blockchain or distributed ledgers; artificial intelligence; internet of things; and augmented reality or virtual reality.
Looking ahead, cloud computing and 5G networking have been key components in the expansion of telecommunications. Cloud computing refers to a place where data is stored and accessed by internet users. 5G is the fifth generation wireless network that will allow for larger amounts of data to be transferred in a shorter time frame. These facets will help support the growing demand for online streaming or the act of downloading and receiving audio and video data.
Online video demand has surged, especially with more people cutting the cord and relying on the internet for entertainment purposes. It would take 5 million years to watch all the video crossing the internet in a single month. About 82% of total consumer internet traffic may be attributed to viewing video content. To support this rising internet demand, $325 billion will be required in infrastructure spending for 5G by 2025 and over 20,000 cell towers is expected to be constructed next year.
“The growth in data center spending by leading cloud providers has driven higher growth for data center REITs,” O’Hara said.
Meanwhile, “the 5G build out will require an increase in spending for network carriers, which may direclty benefit the cell tower REITs,” he added.
Financial advisors who are interested in investing strategies for 5G, technology and internet can watch the webcast here on demand.