Today, we discuss three thematic ETFs to buy for investors looking to tap into future trends, consumer preferences or disruptive technologies. Metrics suggest how fast investor sentiment industries, countries or stocks may change on Wall Street. For instance, since the early days of COVID-19, we have witnessed different trends, including healthcare, green investing, blockchain, crypto, China’s digitalization. cybersecurity, autonomous vehicles and artificial intelligence (AI). Yet, looking beyond the short-term and selecting the right theme demands vigilant due diligence and analysis.
The three thematic ETFs we introduce today may help investors capture the market’s pulse and capitalize on specific industries without betting on single stocks. However, we should note that many thematic ETFs come with higher expense ratios than widely-held index funds tracking the S&P 500, the Dow Jones Industrial Average or the Nasdaq 100 indices. Such higher annual expenses could potentially impact overall returns, so buyer beware.
Defiance Quantum & AI ETF (QTUM)
Quantum technologies (QT) that mostly bring together quantum physics and engineering have been entering the commercial space, with an expected global market of In particular, quantum computing has been getting considerable attention. Meanwhile, consumer interest in the generative AI platforms, such as Alphabet’s (NASDAQ:GOOGL, NASDAQ:GOOG) Gemini and OpenAI’s ChatGPT, are projected to drive the generative AI market to In other words, the AI segment is looking at a 42% compound annual growth rate (CAGR), compared to $40 billion in 2022.
Thus, our first pick among the thematic ETFs to buy is the Defiance Quantum & AI ETF (NYSEARCA:QTUM). The fund in transformative computing technologies such as machine learning, quantum computing and cloud platforms.
QTUM currently with its top 10 holdings accounting for 20% of its $252 million net assets. Quantum Computing Technology dominates the subsector breakdown at 40%, followed by Machine Learning Services (19%) and AI & Application Chips (16%). The majority of firms, over 58%, are U.S.-based, with notable presence from Japan (13%), and the Netherlands (8%).
Among QTUM’s top holdings, we see a globally diverse set of technology companies. They include the cryptocurrency developer MicroStrategy (NASDAQ:MSTR), Nvidia (NASDAQ:NVDA), Socionext (OTCMKTS:SOCNF), Micron Technology (NASDAQ:MU) and MKS Instruments (NASDAQ:MKSI).
Year-to-date (YTD), the fund has and currently trades at We believe QTUM presents a potential opportunity for investing in transformative quantum and AI technologies without having to select individual stocks. Readers should note the expense ratio of 0.4% and dividend yield of 0.8%.
Invesco S&P Spin-Off ETF (CSD)
Spinoffs’ have emerged as a viable alternative for businesses aiming to restructure and enhance corporate returns. Despite a (IPO) activity, with well over 20 in both 2022 and 2023. So far in 2024, Wall Street has seen three
Therefore, continuing our thematic ETFs to buy, we focus on the (NYSEARCA:CSD). It gives access to U.S. companies spun off from their parent companies within the past four years. Launched in December 2006, the fund has a market value close to $60 million.
The CSD fund has 32 holdings and the top 10 stocks represent approximately 60% of the portfolio. Among the leading names are GE Vernova (NYSE:GEV), Veralto (NYSE:VLTO), Constellation Energy (NASDAQ:CEG), GE HealthCare Technologies (NASDAQ:GEHC) and Solventum (NYSE:SOLV). Sector allocations include Industrials (43%), Health Care (20%) and Information Technology (9%), among others.
Last week, CSD hit an all-time high. It has since January, outperforming the YTD return. These returns are, in fact, consistent with that suggests it may be “…more profitable to invest in a portfolio consisting of spinoffs than….the general stock market.”
Finally, investors may want to note that the CSD ETF’s trailing price-to-earnings (P/E) and price-to-book (P/B) ratios stand at 17x and 3x. Additionally, CDS has a 0.65% net expense ratio and 0.5% dividend yield.
ProShares Pet Care ETF (PAWZ)
Our final thematic ETF to buy is the (NYSEARCA:PAWZ). If you are looking to capitalize on the growing trend of pet ownership and demand for pet-related products and services, then this fund should be on your radar.
Launched in November 2018, PAWZ comprises 25 stocks. The fund’s top 10 holdings include Zoetis (NYSE:ZTS), Freshpet (NASDAQ:FRPT), IDEXX Laboratories (NASDAQ:IDXX), Chewy (NYSE:CHWY) and French veterinary pharmaceutical company Virbac (OTCMKTS:VRBCF). These 10 businesses account for almost 70% of its $61 million net assets.
Around two-thirds of the businesses are U.S.-based, followed by the U.K. (9%), France (7%), Switzerland (4%) and Canada (4%). Sector weightings include Pharmaceuticals, Biotechnology (25%), followed by Health Care Equipment & Services (20%), Food, Beverage & Tobacco (20%) and Consumer Discretionary Distribution (19%).
With the global pet care market by 2033 and the U.S. those with children, the sector shows clear growth potential. However, customer’s changing behavior due to economic pressures like have for many businesses in the sector.
As a result, PAWZ since January and nearly 5% over the past year. Meanwhile, it has a 0.50% expense ratio and 0.4% dividend yield. Despite challenges, investing in pet care portfolios for long-term gains remains a potentially prudent choice, given the ongoing trend of pet ownership.
On the date of publication, Tezcan Gecgil had both long and short positions in NVDA stock. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
