Watching for ETFs with the most inflows is a good way to track market sentiment and join a trend before the media and wider retail ecosystem follow suit. Tracking ETF inflows is a way to track smart money. Sometimes a specific thematic ETF is catching an unusual amount of inflow. This may mean that investors with an edge or knowledge of that specific sector think bullish tailwinds are brewing.
Even if inflows are attributable to many individual or small traders rather than massive institutional movement, tracking inflows becomes a way to outsource market research. It can reveal places most traders think the next big move lies.
These three ETFs with the most inflows this year point to where many feel bullishness is bubbling under the surface. Therefore, it may not be too late to join the party.
Sprott Junior Uranium Miners ETF (URNJ)
Sprott Junior Uranium Miners ETF (NASDAQ:URNJ) leads ETFs with the most unusual inflows this year, sending the nuclear energy-focused ETF nearly 25% higher since January 1st.
A handful of unique factors are coming together this year that might make uranium the investment move. The expense ratio is 0.80%, or $80 annually on a $10,000 investment.
The first comes on the heels of one of the largest uranium producers, Kazakh company Kazatomprom, cutting annual forecasts by 2% for the year. As we know from our high school economics courses, reduced supply and continual demand equals higher commodity pricing. Those investing in URNJ are doing so based on the assumption that Kazatomprom’s reduced output means uranium pricing will spike on reduced global supply.
But bullish factors are also influencing the demand side of the equation. Specifically, legislative trends are increasingly pointing to a preference for nuclear energy as a substitute for solar in the nation’s fight for clean, sustainable energy. For example, December’s Nuclear Fuel Security Act prioritizes national nuclear management. And this creates domestic demand for uranium.
Uranium miners tend to be a speculative, volatile, and risky sector in which to invest. But, with record inflows and tangible news supporting its rise, URNJ remains a solid ETF this year.
iShares 20 Plus Year Treasury Bond ETF (TLT)
The bull thesis supporting substantial inflows into the iShares 20 Plus Year Treasury Bond ETF (NASDAQ:TLT) is obvious. But that doesn’t detract from the investment opportunity.
Remember that, like bonds themselves, bond ETF pricing is a function of yield, driven by Federal Reserve interest rates. Bond yields climb as the Fed hikes rates, making existing bond prices fall. Thus, TLT is down more than 30% since March 2022, when rate hikes went into effect. The TLT expense ratio is 0.15%, or $15 annually on a $10,000 investment.
But the inverse holds true, with bond prices rising as rates (and yields) fall. Though the Fed claimed rates would stay “higher for longer,” TLT’s massive inflows indicate that investors think differently and believe the long-dated bond ETF is due for a run. But inflows aren’t the only indicator that rates may fall, sending TLT shares surging. Fed Funds futures pricing data indicates a more than 60% chance that rates will fall slightly by May 1st and fall below 5% by June. If that forecast holds, TLT could begin a rapid march upward – making those riding the current inflow early entrants to a long bond bull run.
AdvisorShares Pure US Cannabis ETF (MSOS)
Like URNJ, AdvisorShares Pure US Cannabis ETF (NYSEARCA:MSOS) is an ETF seeing massive inflows due to bullish news surrounding its sector. In this case, though, it seems as though the long-debated legalization issue may be marking a final pivot. The expense ratio is 0.83%, or $83 annually on a $10,000 investment.
You likely remember the Department of Health and Human Services (HHS) recommending cannabis be rescheduled to a less restrictive rating. Historically, the Drug Enforcement Administration (DEA) takes about 90 days to analyze and respond to HHS recommendations. So, the DEA’s silence on the matter thus far leads many to believe a major announcement is brewing, driving the ETF inflows.
MSOS is the largest cannabis ETF with more than $1 billion in assets under management. Further, AdvisorShares’ CEO Noah Hamman has some words of warning for exuberant investors. He says that any rescheduling efforts are “piecemeal legislation because it still doesn’t address recreational use.” He is cautiously optimistic, though, and said, “Federally, they haven’t changed anything, but we’re finally getting to the point where at the Federal level they’re catching up a little bit.”
Betting on solo cannabis stocks is a tough proposition. But ETF investing helps capture winners while reducing losers’ impact. Hence, the record inflows into this cannabis ETF.
On the date of publication, Jeremy Flint held a long position in TLT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
