News

Investment pro says ETFs are now a better bet than stocks — and reveals areas of ‘tremendous’ value

Market volatility is back, and stocks are getting hit. That’s why buying an exchange-traded fund could be a better bet, according to one investment pro. “The great thing about ETFs is that you’re not picking one stock. You’re not picking that one winner or one loser, you’re picking a basket, you are buying a theme or a broad-based index. So that diversification aspect, combined with all the tax benefits, is a great structure and it’s really growing tremendously in the market,” Jon Maier, chief investment officer at Global X ETFs, told CNBC’s ” Street Signs Asia ” on Thursday. These are the ETF opportunities he said investors should look out for. Electric vehicles “I think investors should be most exposed to areas where there are tailwinds. There are a lot of themes, and they are certainly getting punished at the moment, but innovation is not going to stop,” he said. One such theme that Maier is positive on is the growing popularity of electric vehicles. He said there’s a “tremendous amount” of interest in EVs, with rising adoption in both the United States and globally. “That’s not going to stop,” Maier said. Lithium — a key component in EV batteries — is a prime beneficiary of this transition. Maier noted the current acute shortage in lithium supply at a time when there is a “tremendous amount of need.” He pointed to the Global X Lithium and Battery Tech ETF , which he said is “holding up a lot better” relative to other themes in the market. He continues to see a “tremendous amount” of long-term value in the area. Cloud computing “The cloud is integral. We couldn’t be doing what we’re doing right now without the cloud. There was an acceleration of use during the pandemic. Business models are built on the digital economy, and you can’t really operate effectively without the cloud,” he said. Though many cloud companies are currently experiencing negative market returns, he said he expects the sector’s growth to be “very strong” over the longer term. “It’s tough to weather through the current market environment for sure in terms of market returns, but top line growth certainly exists,” he said. Dividend plays Maier also likes companies with strong cash flows that can navigate supply chain disruptions. “We think what makes the most sense in terms of positioning, at least short term, is looking at companies that have strong cash flows … pay dividends and potentially can raise dividends,” he said. “These are places that are safer, that we are including as core positions in our portfolios,” he added. He named the Global X MLP & Energy Infrastructure ETF as one that pays a “great” dividend, and that could benefit from rising interest rates and energy prices. $10 trillion opportunity Maier said the ETF market is “growing exponentially” and estimates it to be a $10 trillion opportunity — with the U.S. having the lion’s share of $7 trillion. ETFs raked in $43.8 billion of new money amid a rocky August for markets, bringing net inflows for the year to $386.9 billion as at end-August, according to data from Morningstar . “Obviously right now the market is punishing growth and punishing momentum, but there are certain areas of the market where it makes a lot of sense [to buy], and you are seeing inflows despite recent market action,” he said. For instance, he sees “big inflows” into some Preferred ETFs that invest in preferred stocks — a class of stock ownership that has a higher claim on the company’s assets and earnings than common stock. “They played the long end of the curve and with interest rates moving up so much, I think the market is seeing some value in long duration assets just more recently,” Maier said.

Leave a Reply

Your email address will not be published. Required fields are marked *