Here’s Why Internet ETFs Are Sizzling With Opportunities

This story originally appeared on Zacks

The coronavirus outbreak has largely impacted the lifestyle choices and preferences of people. The most notorious change worth mentioning is the growing inclination toward digitization. Amid the pandemic, work-from-home, online shopping, digital payments, video streaming and video game have gained immense popularity.  With the new trends making way, Internet will continue to be a significant requirement in daily lives.

– Zacks

The pandemic has been a blessing in disguise for the e-commerce industry as people continue to practice social distancing and shopping online for all essentials, especially food items. Thus, on par with the digitization trend, the upcoming U.S. holiday season is expected to see a significant surge in online sales. A Mastercard SpendingPulse report predicts online sales growth of 7.5% during the “75 Days of Christmas” period that runs from Oct 11-Dec 24.

The world is gradually moving toward digitization that is increasing the dominance of technology in the financial sector. A Market Data Forecast (MDF) report also highlights the growing opportunities in the global financial technology market, which is expected to see a CAGR of 23.4% between 2021 and 2026. According to the report, the fintech space is expected to reach a market value of around $324 billion by 2026.

Along with an increased interest in online shopping, customers are resorting to digital payments to clear bills. At the same time, merchants and utility providers are increasingly advocating the same. Payment services from tech titans like Google Pay, Facebook Pay, Apple Pay, Amazon Pay, PayPal (PYPL) and Square Inc.’s (SQ) Cash App are the key winners amid the increasing shift to digital payments.

The video game industry is seeing a boom as people are increasingly playing video games for some in-house entertainment, while maintaining social distancing amid the pandemic. Moreover, the boom in the video gaming space might remain in the post-pandemic era as well. For eight months, the total consumer spending on gaming is up 13% year over year to $37.9 billion (according to The NPD Group report). What impresses more is that the video gaming industry is delivering robust growth despite tough year-over-year comparisons, highlighting the true strength in the space.

Cloud computing has emerged as a key technology and is keeping up with the growing work-from-home trend in the fight against coronavirus. It supports organizations in remotely processing a lot of information, developing and running key applications and services, and helping employees worldwide collaborate while working. The work-from-home model has bumped up sales of PCs, laptops and other kinds of computer peripherals.

Internet ETFs to Gain

Against this backdrop, let’s look at some Internet ETFs that will gain from the increasing demand for online gaming, shopping, video streaming and work-from-home trends due to the coronavirus crisis:

First Trust Dow Jones InternetIndex Fund FDN

The fund seeks investment results that generally correspond to the price and yield of the Dow Jones Internet Composite Index. It has amassed $10.96 billion in assets and charges 51 basis points (bps) in expense ratio. The fund has a Zacks Rank #2 (Buy), with a High-risk outlook (read: ETFs to Win & Lose as Delta Variant Cases Surge).

ARK Next Generation Internet ETF ARKW

It is an actively-managed ETF that seeks long-term growth of capital by investing under normal circumstances primarily (at least 80% of its assets) in domestic and U.S. exchange traded foreign equity securities of companies that are relevant to the fund’s investment theme of next-generation Internet. The fund has AUM of $5.36 billion, with an expense ratio of 79 bps. It has a Medium-risk outlook (read: Robinhood Warns on Trading Activity: ETFs in Focus).

Invesco NASDAQ Internet ETF PNQI

It is based on the Nasdaq CTA Internet Index. The fund will typically invest at least 90% of its total assets securities that comprise the index. The index is designed to track the performance of the largest and most liquid US-listed companies engaged in Internet-related businesses and are listed on one of the major U.S. stock exchanges. It has amassed $1.08 billion in assets and charges 60 bps in expense ratio. The fund has a Zacks Rank #2, with a High-risk outlook.

O’Shares Global Internet Giants ETF OGIG

The fund 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 revenues from the Internet and e-commerce sectors that exhibit quality and growth potential. The fund has AUM of $634 million, with an expense ratio of 48 bps.

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ARK Next Generation Internet ETF (ARKW): ETF Research Reports
 
Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
 
First Trust Dow Jones Internet ETF (FDN): ETF Research Reports
 
OShares Global Internet Giants ETF (OGIG): ETF Research Reports
 
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Zacks Investment Research

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