A Shark's in the Water: Kevin O'Leary on Digital Tech

Fast-growing companies in the digital innovation space are driving a deep-sated economic transformation.

In the recent webcast, Kevin O’Leary: Investing in Companies Leading Digital Innovation, Kevin O’Leary, Chairman, O’Shares ETF Investments; and Connor O’Brien, CEO and President, O’Shares ETF Investments, argued that investors are ill-prepared for the economy of the next decade as not every industry and company will be impacted equally by the upcoming digital transformation.

The digital transformation of the economy is already underway. For example, U.S e-commerce sales have grown to $788 billion in 2020, compared to $518 billion back in 2018. The cloud computing market has already grown to $100 billion without any signs of slowing down. Software-as-a-service revenue is projected to expand to $253 billion by 2024, compared to just $56 billion back in 2015.

Among the standouts in the current age of digital transformations, Amazon.com has generated a total return of 1618% over the past decade and Shopify has enjoyed a 3822% total return over the past five years.

O’Leary and O’Brien argued that investors should look beyond the so-called old technology names and focus on up-and-comers that are leading the next stage in the digital transformation. As a way to gain exposure to this rising trend, investors can look to a fund like the O’Shares Global Internet Giants ETF (OGIG). The strategy captures growth of new tech, driven by the mega trends of e-commerce and digital innovation, providing access to the internet giants of today and the potential giants of tomorrow.

The O’Shares Global Internet Giants ETF has exhibited a 40% sales growth rate over the trailing 12 months, a 36% forward sales growth rate for 1 year, and a 56% forward EPS growth rate for 1 year. In comparison, the Nasdaq-100 showed a 22% sales growth rate, 20% forward sales growth rate, and 40% forward EPS growth rate.

OGIG is a rules-based ETF designed to provide investors with the means to invest in some of the largest global companies that derive most of their revenue from the Internet and e-commerce sectors that exhibit quality and growth potential. OGIG’s top portfolio holdings focuses on internet conglomerates, along with smaller exposures to digital advertising, social media, retail e-commerce, digital entertainment, and enterprise software.

As compared to the Nasdaq-100 and the market cap-weighted technology sector, the OGIG Index has outperformed since its inception. The OGIG Index has also exhibited stronger revenue growth than the traditional or old tech segments.

Investors can also consider the benefits of focusing on quality dividend-paying companies with strong balance sheets. For instance, investors can gain diversified exposure to quality dividend payers through assets like the O’Shares FTSE US Quality Dividend ETF (NYSEArca: OUSA). The ETF follows three core investment principles: income, diversification, and capital appreciation. Component holdings have stable cash flow to pay dividends, are diversified across ten sectors to limit volatility, and invest in quality companies with strong financial performances that may have a higher chance of appreciating over time.

The O’Shares FTSE US Quality Dividend ETF has generated more return than the value style as represented by the Russell 1000 Value Index, with less risk along the way. Compared to the value benchmark, the OUSA Index has has generated greater return on assets, a lower leverage, higher dividend growth, and lower volatility.

Financial advisors who are interested in learning more about companies leading the digital innovation can watch the webcast here on demand.