ETFs to Play New Trends Triggered by COVID-19

Sweta Killa

10 July 2020 at 11:10 am·6-min read

The COVID-19 pandemic has changed the consumer landscape and business trends all over the world. While the infection stabilized in late April, it spiked in the United States after the economy reopened. Per the latest report from Johns Hopkins University, the country saw a record number of 60,646 new coronavirus cases on Jul 9. At least two dozen U.S. states have paused or rolled back reopening plans in light of the surge.

It is uncertain when the virus will vanish, as there are no vaccines or treatments currently. However, hosts of companies are working on a vaccine that could come out by next year. As such, the pandemic has resulted in new trends that will continue at least this year. We have highlighted some in detail below:

Remote Working

This has been the emerging theme among youngsters, especially millennials (ages 26 to 35) and Gen-Z workers (ages 18-25), not only driven by the pandemic but also because of their thinking. As people at large and companies across sectors are working remotely, cloud-based platforms and services have become essential. Cloud computing has encouraged video conferencing, gaming, e-commerce, remote project collaboration, online classes and other programs.

As such, Global X Cloud Computing ETF CLOU, First Trust ISE Cloud Computing Index Fund SKYY, WisdomTree Cloud Computing Fund WCLD and Wedbush ETFMG Global Cloud Technology ETF IVES could be exciting plays in this area. The former three funds have gained 46.6%, 30.5%, and 14.1%, respectively, so far this year while IVES, which debuted in April, surged 51.3% over the past 13 weeks. SKYY and WCLD has a Zacks ETF Rank #2 (Buy) while CLOU has a Zacks ETF Rank #3 (Hold) (read: 5 Red Hot Stocks in the Top ETF of 1H).

Home Entertainment

As people want to avoid direct contact from others, entertainment at home has been on a surge, resulting in higher demand for streaming services and video gaming. Viewers are signing up to Netflix and Amazon AMZN Prime in droves. Other streaming service providers like YouTube with Hulu, Disney DIS + and Apple AAPL TV Plus are also seeing higher usage. Quibi, HBO Max and Peacock have also made 2020 a busy year for the new streaming services. The global video streaming market is expected to witness a CAGR of 20.4% to $184.3 billion through 2020-2027, according to a new report released by Million Insights.

The global video gaming industry is also booming with the adoption of esports and increased video game usage. Some of the most-popular games include Call of Duty: Warzone, Counter-Strike: Global Offensive, Call of Duty: Modern Warfare, Half-Life: Alyx, Grand Theft Auto V and Animal Crossing: New Horizons. Per ResearchAndMarkets.com, the global gaming industry is expected to register a CAGR of 12% during the forecast period 2020-2025.

Investors could tap the booming home entertainment trend through iShares Evolved U.S. Media and Entertainment ETF IEME, VanEck Vectors Video Gaming and eSports ETF ESPO, ETFMG Video Game Tech ETF GAMR, Global X Video Games & Esports ETF HERO and Roundhill BITKRAFT Esports & Digital Entertainment ETF NERD. These ETFs have delivered strong returns over the 13-week period (IEME – 17.2%, ESPO – 40.8%, GAMR – 41.2%, HERO – 47.9% and NERD – 56%).

Online Shopping

Consumers have made a radical shift toward online shopping in order to avoid direct contact or go out of home. Per eMarketer, U.S. e-commerce retail sales are expected to jump 18% this year with 12.2% growth coming from older buyers in the age group of 65 and older. The top 10 e-commerce retail businesses are expected to grow at above-average rates of 21.8%. Amazon will continue to gain U.S. ecommerce market share while Walmart's WMT accelerating e-commerce growth will take it to the No. 2 position for the first time (read: ETFs to Benefit From Surge in E-Commerce Sales).

The surge in e-commerce has made Amplify Online Retail ETF IBUY, ProShares Online Retail ETF ONLN, and ProShares Long Online/Short Stores ETF CLIX popular in the retail space. These funds are up 67.7%, 59.7%, and 45.5%, respectively, over the 13-week period.

Cyber Security

With the increasingly digital world, the need for cyber security has been growing by leaps and bounds. This is because the digital transformation has increased the risk of security breaches and threats. In fact, we have seen years’ worth of digital transformation in months amid pandemic.

ETFMG Prime Cyber Security ETF HACK, First Trust Nasdaq Cybersecurity ETF CIBR, iShares Cybersecurity And Tech ETF IHAK and Global X Cybersecurity ETF BUG targets the cyber security industry. These funds are up 24.2%, 29.6%, 28.6% and 40.4%, respectively, over the 13-week period (read: Cybersecurity Stocks & ETFs for the Coronavirus Crisis).

Health Insurance

The COVID-19 scare is expected to benefit the health insurance companies, as there will be more enrollments to Medicaid plans. For most of the health insurance companies, 2021 enrollments will likely be very high given the impact of the crisis. In order to take advantage of this emerging trend, investors should invest in iShares U.S. Healthcare Providers ETF IHF, which has gained 7.4% over the 13-week period. It offers exposure to U.S. companies that provide health insurance, diagnostics and specialized treatment. The product has a Zacks Rank #3.

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