Thematic ETFs are hot right now.
According to Bloomberg data, 69 new ETFs were launched in September, making it one of the busiest for the $7 trillion ETF industry since 2016. More importantly, as Bloomberg points out, it was the first month since September 2021 with more than 50 ETF launches.
That’s cause for celebration if you’re an ETF provider or an investor interested in owning some of these new funds.
“It’s just exhibiting the affinity investors have for ETFs and issuers coming to address those needs — from all across the capital markets spectrum too,” said Todd Sohn, ETF and technical strategist at Strategas Securities, as reported by Bloomberg.
Each of the following thematic ETFs have a couple of points in common. First, they are funds with precisely 100 holdings. Next, they are global. I’m looking for 100 reasonably-sized companies with a minimum market capitalization of $500 million from all parts of the world, developed and emerging
While bond funds have been the biggest hit in 2023, I’d like to see more thematic ETFs in future launches. These are the three I would love to see launch in 2024.
The Franchise 100 ETF
The Franchise 100 ETF would be 100 companies generating at least a portion of their revenues from a franchising business model. For example, Berkshire Hathaway (NYSE:BRK-B) might qualify because of its Dairy Queen restaurants. However, each name included in the portfolio would be weighted according to the franchise-based revenue as a percentage of the overall sales.
Franchises tend to operate asset-light business models that don’t require much capital to grow the number of opening locations. Also, they attract numerous sports personalities.
For example, Shaquille O’Neal, the Hall of Fame NBA basketball player, is said to have invested a significant portion of his $400 million net worth in franchises such as Auntie Annie’s, Five Guys, 24-hour Fitness Centers, and Krispy Kreme (NASDAQ:DNUT).
Not all franchises are owned by public companies, but enough are worldwide to construct an excellent 100-stock portfolio. I’d probably start with Chipotle Mexican Grill (NYSE:CMG) and work out from there.
The Sports Business 100 ETF
This next one has been on my radar for years. It’s the The Sports Business 100 ETF.
Once upon a time, a labor-sponsored investment fund was created in my home province of Ontario. You got a tax credit for investing in the fund, which invested in Ontario-based sports-related businesses. The combination of venture capital and private sports investments never seemed to gel. It closed soon after launching with little to show for its efforts.
However, you can find sports-related stock indexes. Sportico, the online publication about the sports industry, launched a sports index in June 2020. It is a collection of 40 stocks involved in sports. While Sportico won’t reveal its constituents to non-subscribers, you can figure out some names through Google.
For example, TKO Group Holdings (NYSE:TKO), the merged entity combining UFC and WWE, is one of the stocks in the index. TKO has lost 22% since the two entities officially merged in mid-September.
If you look hard enough, more than enough possible global candidates are able to fill the 100 spots in the The Sports Business 100 ETF.
The Atlanta Braves Holdings (NASDAQ:BATRA, NASDAQ:BATRK) could be one of them. Of course, its value depends on its performance in the MLB playoffs currently underway.
The Construction Industry 100 ETF
The Construction Industry 100 ETF is the third pick.
When you look for themed ETFs, they tend to fall under the broader “Infrastructure” category, ranging from utilities to airport operators. The biggest construction company that I know of that’s publicly traded is Emcor Group (NYSE:EME). Most of the ones in the U.S. have a market cap of less than $10 billion.
However, consider all the different types of companies associated with the construction industry. Caterpillar (NYSE:CAT) and Procore Technologies (NYSE:PCOR) come to mind. It becomes simple to create a 100-stock portfolio of construction-related companies comprising the ETF.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
