With the help of sagging Treasury yields and a spate of impressive earnings reports, the technology sector is back in style, and that could be supportive of disruptive growth strategies.
Advisors looking for a convenient approach to disruptive growth and one that’s chock full of attractive technology exposures may want to consider the WisdomTree Disruptive Growth Model Portfolio.
“This model portfolio targets structural growth themes we believe are driving innovation and disruptive changes across different industries, sectors, and segments of society. This portfolio’s objective is maximum long-term capital appreciation, and its holdings typically exhibit above-market growth projections,” according to the issuer.
The model portfolio features six exchange traded funds, and while many of WisdomTree’s other model portfolios are larger by roster size, the disruptive growth portfolio covers plenty of bases in the universe of innovative growth segments. The model portfolio’s diversity is useful because many old guard tech strategies expose investors to just a few stocks.
“Information technology is a highly concentrated sector, with just a handful of companies representing more than 50% of the sector’s weight—including the two behemoths Apple and Microsoft,” writes Charles Schwab’s David Kastner.
As an investment thesis, disruptive growth is long-term in nature because many of the themes represented in the WisdomTree model portfolio are still in their early innings. However, thanks to holdings including the Global X Cybersecurity ETF (BUG) and the WisdomTree Cloud Computing Fund (WCLD), the model portfolio provides exposure to important near- to medium-term trends.
“Following a dearth in capital spending, there are signs that investment in cloud and networking equipment is picking up, which could persist if the economic expansion continues,” notes Kastner. “Also, the ongoing rollout of 5G wireless infrastructure is likely to accelerate—increasing demand for telecommunication components and semiconductors. A significant short-to-intermediate risk is the supply chain issues, which is proving to be significantly problematic for sourcing semiconductors.”
While many tech stocks, including those residing in the disruptive arena, are richly valued, that’s reflective of growth prospects and strong underlying fundamentals. Additionally, many of the themes represented in the WisdomTree model portfolio, fintech being a prime example, are buoyed by impressive long-ranging catalysts.
“Financial services technology and surging online retail sales are supporting cloud computing infrastructure and software,” says Kastner. “Long-term growth tailwinds, as businesses enhance productivity with tech investment.”
For more on how to implement model portfolios, visit our Model Portfolio 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.