Your Monthly Thematic Roundup: Vol. 01 | 2/2/21

Top 2020 performers and a “Cinderella Story” to start off the new year.

#3: Israeli Tech

ITEQ: +59.93%* in 2020

Clean Energy and Internet Software stocks were the two biggest drivers of ITEQ®‘s index. Mix in a new outlook on politics with “The Abraham Accords” in the Middle East, promoting trade and inter-state investments is helping to bolster new opportunities for Israel’s tech scene.

  1. 1. Clean Energy exposure: If you can remember time before COVID-19 spread across the world, the climate crises commanded the headlines and groups of people around the world held demonstrations to showcase their concern. In 2020, major installations of wind farms and solar farms eclipsed the COVID news as new landmarks were made in these growing areas of sustainability.

2. Work from home movement: These three words became more ubiquitous than ever before during COVID shutdowns. Early on in shutdowns, Internet software and cloud stocks became the solution for industries that still needed to operate. With wide adoption of cloud computing from organizations around the world, “work from home” stocks are here to stay.

As for comments on the new political structure bolstering new business in the Middle East, here is a piece written by our partners at Blue Star Indexes…

Peace is in the air and Israel innovation is the target – Joe Levin, BlueStar Indexes

The shift in Middle East politics appears to have missed the front page of most financial newspapers, but it should not be underestimated. The Abraham Accords, the peace accord with the UAE and the declaration of peace with Bahrain, drastically re-draws the political map in the region.

Beyond trade and direct investment, we anticipate significant portfolio investment flows into Israel’s capital markets from Gulf-based investors, starting with UAE’s massive government-controlled funds.

The Abu Dhabi Investment Office (ADIO) has said that it plans to open a network of foreign offices, beginning with its first one in Tel Aviv, Israel. It said that the new office in Tel Aviv, which will be opened over the coming months, will focus on facilitating connections between innovation-focused companies and organizations in Abu Dhabi and Israel. Conversely, Israeli institutions like Bank Leumi said its subsidiaries Leumi Partners and Leumi Tech would help forge ties between Israeli companies and UAE investors and wealth funds.

The appeal of Israel’s tech ecosystem, commonly-referred to as “Start-Up Nation,” to contribute to the diversification of Gulf economies will now be even more irresistible to UAE investors, entrepreneurs and innovators. Early-stage Israeli firms, as well as venture capital and private equity funds focused on Israeli Tech will surely be major beneficiaries. But equally important, and perhaps not initially as visible, we expect substantial investment flows into Israeli public equities, especially Israeli tech stocks listed worldwide, such as those tracked by the BlueStar Israel Global Technology ETF – ITEQ®, which provides exposure to the most dynamic parts of Israel’s innovation ecosystem. This consists of AgriTech, BioTech and Medical Devices, CyberSecurity and DefenseTech, all of which are highly relevant to the UAE’s economy.

Performance (as of 12/31/20)

Fund Inception1: 11/02/2015          Expense Ratio: 0.75%

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477). Performance is annualized for periods greater than 1 year.

#2: Video Game Tech

GAMR: +78.63%* in 2020

Video game tech is another theme that benefitted greatly by the pandemic shutdowns. Schools were closed around the world, commutes were eliminated for most, and no opportunities to interact with friends and loved ones in person. This trifecta created a “perfect storm” for this fast-growing industry leading up to the launch of the new generation of gaming consoles in time for the holiday shopping season.

Kids need no introduction or catalyst to play video games. I grew up playing games as a 90’s kid, before they were designed around online interaction and a competitive landscape that offers millions in prize money. Now, with school closures and certain lockdown protocol, more games will be played.

Just one week after the shutdowns began, “web traffic climbed 20%…gaming skyrocketed 75%. Social media usage remained constant.” Full story by CNBC.

Source: CNBC

In 2020, similar to cloud computing, video games were fast-tracked when it came to adoption by new gamers.

With more time in the day due to the elimination of commuting, you need to be allowed to go to work in order to commute, and a thirst for interactive entertainment (you can only Netflix N Chill for so long), adults of all ages have been picking up gaming. Gaming comes in many forms be it console and PC gaming, probably what most think of when video games come up, but the fastest growing area is mobile gaming; Candy crush, angry birds, solitaire and hundreds of thousands of other options. People are spending more time on their phones entertaining themselves with video games.

Performance (as of 12/31/20)

Fund Inception: 3/08/2016          Expense Ratio: 0.75%

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477). Performance is annualized for periods greater than 1 year.

IN THE NEWS

#1: Global Cloud Tech

IVES: +92.01%* in 2020

Cloud computing companies benefitted massively in 2020 from the COVID-19 shutdowns. Employees in many municipalities were under a mandated lockdown for a portion of March, April, and May. During this time many businesses and even entire industries were forced to temporarily shut down. But what about the industries/businesses that were free to work?

Enter the cloud. Cloud computing offers the opportunity to access digital data from anywhere in the world as long as you have a connection to said cloud, an internet connection. The transition to cloud-based information systems was seen by many experts as an inevitable step in the evolution of business. Tell these businesses their employees cannot move freely to and from the office and this 3-5 year projected evolution was fast tracked and adopted by many large employers around the world. Yes, the world. This global theme has become a business standard and opening up opportunities to do business in new ways and will not be something easily set aside, if ever.

Cloud computing is the new normal. We have not reached mass adoption, but it has been fast tracked by many industries and businesses. Get to know the cloud and be comfortable connecting to it because it will now be a part of everyday life for decades to come.

Performance (as of 12/31/20)

Fund Inception2: 3/08/2016          Expense Ratio: 0.75%

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477). Performance is annualized for periods greater than 1 year.

IN THE NEWS

A “Cinderella Story”

MJ: -11.63%* in 2020; +38.78% in Q4 2020

Global cannabis stocks spent most of 2020 in the red; however, there was a sharp reversal in Q4. New legalization measures in five states, a new classification from the UN as a “less dangerous drug,” and a pro-cannabis administration voted into the White House, MJ returned +38.78% just in Q4 and carried this momentum throughout January 2021. Cannabis’ current level of global acceptance is allowing unprecedented access for researchers to continue to understand the benefits and opportunities cannabis and its derivatives have to offer humanity.

On the first trading day of 2020, 1.2 billion+ people around the world had legal access to cannabis, either in medical or recreational form, ushering in a major reversal of opinion on the plant as communities experienced the benefits of legalization firsthand. Here in the U.S., not included in the 1.2B figure above, 39 states had legalized either medical or recreational use and laid the groundwork for an eventful election season. Multiple bills have been introduced over the past years (e.g. SAFE Banking Act, MORE Act, STATES Act), creating plenty of talking points on the subject throughout debates, meetings of Congress, and more.

The elections “…delivered a unanimous mandate for recreational marijuana use. in Arizona, Montana, New Jersey and South Dakota, and approved its use for medicinal purposes in Mississippi and South Dakota. With only 15 states still outlawing marijuana in any form, some experts believe the campaign to advance formal policy and promote acceptance of a drug once widely abhorred by the public has reached a tipping point.” – The Guardian: How Marijuana Legalization Made Strides Across the US

In addition to the strides being made in the US, the U.N. reclassified cannabis as a “less dangerous drug” shortly after the US elections. Previously, cannabis was on a list titled “The World’s Most Dangerous Drugs,” so the new classification will allow more access to the substance for researchers and patients around the world (or at least in the 53 member states of the U.N.).

Forbes: Cannabis Reclassified as Less Dangerous Drug by U.N.

“MJ remains as the proxy for U.S. investors looking to invest in global cannabis.” – Sam Masucci, CEO & Founder

Cannabis is coming off of an 80+ year prohibition in the U.S. and most of the world. Now that the science community has the opportunity to have (mostly) unobstructed access to the plant, this opens up many opportunities for the future.

Performance (as of 12/31/20)

Fund Inception3: 12/03/2015          Expense Ratio: 0.75%

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477). Performance is annualized for periods greater than 1 year.

IN THE NEWS

ABOUT ETFMG

ETF Managers Group LLC (together with it’s affiliates, “ETFMG”) is an Investment Adviser to exchange-traded funds (ETFs), founded in 2014 with a vision of developing innovative thematic ETFs that provide investors unique exposure to new markets. Today, the ETFMG fund line up provides access to a diverse collection of global themes and is comprised of 75% first to market products. We turn portfolio management strategies into successful ETFs by partnering with market segment experts to bring long- term growth opportunities to investors. ETFMG funds demonstrate the benefits of the ETF wrapper and having thematic products in investors’ portfolios.

Short term performance figures presented are not indicative of and do not guarantee similar long term returns.

Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477). Performance is annualized for periods greater than 1 year.

Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477), or by visiting www.etfmg.com. Read the prospectus carefully before investing.

*For standard average annual returns for ITEQ, please click here
*For standard average annual returns for GAMR, please click here
*For standard average annual returns for MJ, please click here
**For standard average annual returns for IVES, please click here

1. BIGITech® went live on October 16, 2013.

2. On April 7, 2020, the Fund’s investment objective and principal investment strategies were substantially revised; therefore, the performance and average annual total returns shown for periods prior to that date were achieved under the Fund’s prior investment objective and principal investment strategies and would have differed if the Fund’s current investment objective and principal investment strategies had been in effect during those periods.

3. On December 26, 2017, the Fund’s investment objective and principal investment strategy were substantially revised; therefore, the performance and average annual total returns shown for periods prior to December 26, 2017 is likely to have differed had the Fund’s current investment strategy been in effect during those periods. The Fund’s prior investment objective sought to provide investment results that corresponded to the performance of the Solactive Latin America Real Estate Index, which tracked equities with primary listings in the Latin America region that derived most of their income from real estate and real estate services. The Fund began tracking the Prime Alternative Harvest Index on December 26, 2017.

Author Portrait
Bryan is ETFMG's West Coast Director of Sales. He holds principal licenses for selling both general securities and commodity and futures products, continuing his education of finance with a focus on the family office space serving high net worth individuals.