Admittedly, looking at funds for the end of the pandemic is premature because the novel coronavirus is still a force to be reckoned with. The combination of reopening headlines, a buoyant stock market and other issues commanding national headlines could be creating the illusion that Covid-19 is a thing of the past.
It’s not. Progress is being made on the vaccine front, but it’s likely to be a year or more before such a product comes to market. In the meantime, some states, including Arizona, Florida, North Carolina and Texas, are experiencing precipitous upticks in virus cases.
Those statements aren’t meant to frighten, but they should serve as cautionary notes for investors over the near-term. Eventually, the coronavirus will be a thing of the past — or at the very least, healthcare workers will have the therapies or vaccines needed to treat patients afflicted with the virus.
Optimism is palpable, as underscored by recent price action in broader equity benchmarks and that is matriculating down to some of the following “end coronavirus” exchange-traded funds.
- U.S. Global Jets ETF (NYSEARCA:JETS)
- ETFMG Travel Tech ETF (NYSEARCA:AWAY)
- Loncar Cancer Immunotherapy ETF (NASDAQ:CNCR)
- VanEck Vectors Gaming ETF (NASDAQ:BJK)
- Industrial Select Sector SPDR (NYSEARCA:XLI)
- ARK Fintech Innovation ETF (NYSEARCA:ARKF)
- iShares MSCI Brazil ETF (NYSEARCA:EWZ)
Post-Coronavirus ETFs: U.S. Global Jets ETF (JETS)
Expense ratio: 0.60%, or $60 annually per $10,000 invested
Among ETFs, the U.S. Global Jets ETF is one of the ultimate coronavirus plays, and that has been true in either direction. From its February peak to its March trough, the lone airline ETF lost two thirds of its value. Then it spent a couple of months chopping around as some pundits were writing obituaries for the airline industry.
Fast-forward a little bit and the JETS script is being flipped. Over the past month, the airline ETF is up more than 50%, and that’s not a coincidence because that time frame includes plenty of reopening news as well as updates from several major carriers that bookings are surprising to the upside. What’s encouraging here is that JETS, and plenty of its holdings, still trade nowhere close to previous highs meaning there could be more upside to had with airlines stocks.
The bottom line with JETS is that the better the reopening news gets, the better the fund is likely to perform. Said another way, if a coronavirus vaccine comes to market sooner than expected, the airline industry will likely reach 2019 capacity levels more rapidly than previously forecast and that would be a boon for JETS.
ETFMG Travel Tech ETF (AWAY)
Expense ratio: 0.75% per year
In covering new ETFs, I often say timing matters for better or worse. It’s not a knock on the ETFMG Travel Tech ETF. But being the first ETF to focus on the technology side of the travel business — and debuting in February — was inauspicious timing, to say the least.
AWAY debuted around $25 and flirted with $26.70 before getting close to $11 on the downside when the coronavirus blues set in. That type of response to the Covid-19 shutdown isn’t surprising for an ETF that’s home to the likes of Lyft (NASDAQ:LYFT), Booking Holdings (NASDAQ:BKNG), Uber (NYSE:UBER) and Trivago (NASDAQ:TRVG).
Remembering that airlines and hotels were two of the groups most battered by the virus, it stands to reason that AWAY with a roughly 81% weight to travel booking, advice and price comparison sites would follow suit. However, the thesis with AWAY is similar to that of JETS: the sooner the virus is put to bed or a legitimate vaccine is ready, the better these funds should perform.
Loncar Cancer Immunotherapy ETF (CNCR)
The Loncar Cancer Immunotherapy ETF is included here for a simple reason: for the moment, it’s the ETF with the largest weight to Moderna (NASDAQ:MRNA), one of the companies closest to success on the Covid-19 vaccine front. Moderna stock currently represents 12.11% of CNCR’s weight, through that could change when the fund next rebalances because it’s designed to be an equal-weight ETF.
Obviously, CNCR’s status as a post-virus play revolves around Moderna’s mRNA-1273 vaccine becoming either the first or one of the preferred Covid-19 vaccines.
That makes CNCR appear to be a confining play. In reality, that’s not the case. It’s easy to approach the fund as a Covid-19 idea simply because of Moderna looming so large here, but the truth is oncology is one of the hotter biotechnology segments and one with potentially lucrative and positive long-term implications. That is to say CNCR can shine well after Covid-19 is put to bed.
VanEck Vectors Gaming ETF (BJK)
Expense ratio: 0.66% per year
I recently mentioned the VanEck Vectors Gaming ETF as one of the reopening ideas to consider because there are more upside catalysts looming for this fund. Even if you only casually follow gaming stocks — or don’t follow any at all — there’s good chance you’re hearing about Las Vegas reopening and several of the other large domestic gaming markets doing the same.
Prior to that, plenty of casino equities, including some BJK components, ran higher. They’re moving in similar fashion to airlines and cruise operators. Take all that into account and it’d be easy for an investor to think BJK’s run is done for the time being or only limited upside is available from here.
That’s wrong. As I recently noted in reference to BJK, Macau, the world’s largest gaming center, isn’t really reopened. Sure, one can gain entry to the plethora of casinos there. It’s getting to the Special Administrative Region (SAR) that’s difficult because mainland China and Hong Kong are still restricting travel to Macau.
As such, gaming revenue there is at rock bottom levels. However, Macau operators believe there’s pent up demand and when travel bans are relaxed, the floodgates will open and gamblers will again flock to the casino mecca.
Industrial Select Sector SPDR (XLI)
Expense ratio: 0.13% per year
As a basic industrial ETF, the Industrial Select Sector SPDR is home to not only airlines, but the companies that help those jets fly. That includes Boeing (NYSE:BA) and General Electric (NYSE:GE) — two names that experienced coronavirus volatility of their own earlier this year.
The airline industry epitomizes XLI’s status as an end-of-virus play. As carriers get closer to 2019 capacity, they can bring more jets back to service and assuming the economy is vibrant, they can order more new jets, which benefits Boeing and GE.
The risk with XLI is that while the airline exposure is meaningful, it’s not the entire fund. XLI needs contributions from downtrodden names — Caterpillar (NYSE:CAT) being a prime example — to legitimize its rebound hopes.
ARK Fintech Innovation ETF (ARKF)
Expense ratio: 0.75% per year
Many of the aforementioned funds made for predictable coronavirus investment victims, and while the ARK Fintech Innovation ETF wasn’t immune to those pressures, its rebound is nothing short of spectacular. A second-quarter gain of 39% confirms as much.
One comparison for ARKF in the virus environment is e-commerce. Meaning that e-commerce was already disrupting traditional retail before Covid-19. The pandemic merely hastened online shopping’s advances. Same goes for fintech and its encroachment upon the old guard financial services industry.
Even in a pandemic world, people still want to access their money, get paid, transfer cash, etc. However, they don’t want to enter banks. That speaks to the increasing prominence of Dutch firm Adyen NV, PayPal (NASDAQ:PYPL) and Square (NYSE:SQ) — all ARKF holdings – in the financial services landscape. The penetration of those companies in the pandemic climate is setting them up for more success when the virus is vanquished.
“Many investors will have viewed shares in Adyen, PayPal, and Square as a defensive play during the pandemic, but all three should maintain their run of strong performance on the stock market in the longer term, according to Claudio Alvarez, London-based partner at GP Bullhound, a fintech investment and advisory firm,” reports S&P Global Market Intelligence.
iShares MSCI Brazil ETF (EWZ)
Expense ratio: 0.59% per year
Saving the riskiest for last, there is the iShares MSCI Brazil ETF. Assuming one is to believe China told the truth about its coronavirus case and death count, the U.S. has the most cases in the world, but Brazil recently moved to the second spot with 892,000 confirmed cases and over 44,000 deaths.
In both categories, the largest Latin American economy has more than 10% of the global totals. However, EWZ’s one-month gain of more than 38% suggests some traders are willing take on the risk and volatility that often comes with Brazilian equities.
And there’s plenty of risk here. President Jair Bolsonaro’s handling of the virus in his country weakened his political clout and an already fragile economy. Things were so tenuous a couple of months ago that many of the countries that border Brazil closed their borders with country. Some even militarized those borders to prevent Brazilians from crossing.
Then there’s the matter of EWZ’s 28.7% weight to bank stocks at a time when the country’s central bank will need to lower interest rates. However, the lesson from the likes of JETS and BJK is that if there’s good news on the horizon, risk-tolerant investors wanting to nibble at EWZ need to do so before that news hits the wires.
Todd Shriber has been an InvestorPlace contributor since 2014. As of this writing, he did not hold a position in any of the aforementioned securities.