Thematic ETFs are growing in popularity as technology invades the world. But one, in particular, outperforms the competition. The WUGI ETF has grown by over 27% this year, with 5G slowly replacing older versions.
the Esoterica NextG Economy ETF (WUGI) focuses on capturing growth in the digital economy. In particular, WUGI ETF invests in companies at the forefront of 5G technology.
With that in mind, the ETF is investing in stocks fueling 5G like chipmakers. Not only that, but the fund manages a diversified portfolio of growth and value stocks with different market capitalizations.
Despite the recent underperformance of growth stocks, WUGI is making headway. By using a unique analytical approach, WUGI exceeds expectations.
The 5G market is growing rapidly, with annual growth forecast of nearly 60%. Can WUGI ETF continue its momentum? Let’s see what the fund is and how it compares to the competition.
How WUGI ETF invests in 5G technology
If you are looking to capture the growth of 5G, the holdings of WUGI ETF are tied to the growing market. That said, the 5G market will face stiff competition that will seek to eliminate others from the arena. As a result, there will clearly be winners and losers.
Even though wireless carriers like Verizon (NYSE: VZ) are the biggest names in 5G, they may not be the best way to capture growth.
That said, the companies creating the technology to make 5G possible will be the biggest winners. WUGI analysts study the two largest markets, the United States and Asia, to identify the leaders.
The ETF approaches its investments both from the top down and from the bottom up by finding quite popular leaders.
At the same time, technology changes rapidly and leaders can change, making active management a priority. The managers seek investments in four main sectors:
- New semiconductors
- Cloud and Edge Computing
- SAAS and,
- Enabling technology
This idea is that every 5G device will need a new semiconductor to function. Thus, chipmakers are an essential part of the future of communication. In fact, they power most of the rapidly growing industries. These industries include the metaverse and self-driving cars.
On top of that, advanced computing proves to be superior as businesses use massive amounts of data to gather information about consumers. Not only that, but with the expansion of 5G around the world, there is more data than ever before. And therefore, companies with the ability to filter this information will have a major advantage.
With the ETF focusing on 5G, the portfolio is made up of over 60% tech stocks. To date, the fund has over 45 million assets under management (AUM).
ETF WUGI currently has 33 positions. Here are the top ten.
- Advanced micro devices (Nasdaq: AMD): 8.65%
- Nvidia (Nasdaq: NVDA): 8.12%
- Sea LTD (NYSE: SE): 7.57%
- Meituan (OTC: MPNGF): 5.91%
- Marvell Technology (Nasdaq: MRVL): 5.65%
- Qualcomm Inc (Nasdaq: QCOM): 5.38%
- Bilibili Inc (Nasdaq: BILI): 4.47%
- Taiwan Semiconductor Manufacturing Co. (NYSE: TSM): 3.99%
- Alphabetical class C (Nasdaq: GOOG): 3.90%
- Microsoft (Nasdaq: MSFT): 3.67%
As you can see, the portfolio invests heavily in technology with a focus on semiconductors. Another key point concerns the regions in which it participates, the four main holding companies operating in the United States, China and Singapore.
Plus, these are companies leading the world into the future of technology. Representing over 57% of the portfolio, the top ten stocks are behind ETF returns this year.
Despite some exposure to an underperforming Chinese market, stocks like AMD (+ 66% YTD) and NVDA (+ 135%) are pushing WUGI higher.
How does WUGI ETF compare to other ETFs
As a thematic ETF, WUGI focuses on a specific stock market theme. In the case of WUGI, the fund invests in 5G and related technologies.
Compared to other popular thematic ETFs like ETF Arche Innovation (NYSE: ARKK), WUGI outperforms. While WUGI ETF is up over 27%, ARKK is down 20%. But if you compare the two assets from the start of WUGI, they have similar returns with WUGI + 164% and ARKK + 146%.
While ARKK has calmed down after a strong 2020, WUGI continues to break into ATH territory. At the same time, several of ARKK’s main holdings are on the decline, with pandemic coins losing investor interest.
For example, stocks like Roku (-28%), Teladoc Health (-53%), and Zoom (-48%) are all down sharply after seeing their values skyrocket in 2020.
ETF ARKK is also actively managed while focusing on ‘disruptive innovations’ such as AI and electric vehicles. Both ARKK and WUGI ETF have an expense ratio of 0.75% which is the higher.
Yet ARKK manages many more assets than WUGI. At the time of this writing, ARKK has 25.52 billion net assets, while WUGI has 51.79 million dollars. And on top of that, ARKK is much more negotiated. It has an average daily volume of 8.43 million compared to 3.2 K for WUGI ETF.
What the long-term WUGI ETF looks like
Considering the companies that make up the majority of WUGI ETFs, the fund has incredible potential. With AMD, Nvidia and Sea Ltd making up nearly a fifth of the portfolio, investors are eagerly awaiting the digital movement to come.
Not to mention that the ETF has a significant interest in TSMC, the largest foundry in the world. As a foundry, TSMC supplies chips for brands like Apple, Nvidia and Intel. This is important with most new technologies requiring newer and updated chips.
Overall, WUGI is investing in the future of communication by focusing on the 5G market. More importantly, the companies in which WUGI invests are at the cutting edge of technology in the future with their products.
At the same time, the fund is strongly focused on technology and in particular semiconductors. If the sector sees weakness, the fund could also underperform.
Looking ahead, WUGI ETF appears to be in a strong position to capture the growing 5G market. Instead of trying to pick the winners, WUGI offers a wide investment option.
About Pete Johnson
Pete Johnson is a seasoned financial writer and content creator specializing in equity and derivatives research. He has over ten years of personal investment experience. Rummaging through 10-K forms and finding hidden gems is his favorite pastime. When Pete isn’t doing stock research or writing, you can find him enjoying the outdoors or sweating while exercising.