The coronavirus pandemic has changed the world. But it has also accelerated certain technological trends that investors should be tapped into. From automation to genomics, these advancements are here to stay and there are many growth stocks that are just getting started.
ProShares' Executive Director of Thematic Investing Scott Helfstein sat down with The Motley Fool to dive into some of the intriguing stocks in their new ETF: ProShares MSCI Transformational Changes ETF (ANEW +0.47%). He shared plenty of tips that all kinds of investors can apply to their own portfolios.
Corinne Cardina: Hi, everybody. I am Corinne Cardina. I'm the Bureau Chief of Healthcare and Cannabis on fool.com. Before we get started, I'd like our viewers to know we're using a question and answer service called Slido. You can open that up in your browser. There's also an app. Our code is MFLive. You can submit questions, upvote other people's questions for the ones you want to see answered. I'm so excited to welcome Scott Helfstein, like I just said, Executive Director, Thematic Investing at ProShares. Hi, Scott, how are you?
Scott Helfstein: Hey, Corinne. I'm well. How are you?
Cardina: I'm good. Fools, for the next 30 minutes we are going to talk about ProShares' new ETF. It is called ANEW. I'm going to drop the ticker in the chat, and it tackles four transformational changes that are being accelerated by COVID-19. Scott, can you give us the highlights of what those four transformational changes are?
Helfstein: Sure. It really has to do with how we've spent our time and our lives have changed over the months of the pandemic, and if we think about the hours of our day, if we're fortunate enough, we work, we try and to take care of ourselves. The way we consume has changed, the way we connect has changed. How many of us had FaceTime or Facebook (FB 1.18%) apps open at holiday tables at some point in the last nine months? So really, what we wanted to do was put together a set of companies that really spoke to how our lives have changed, but more importantly, how those changes were already in place and were accelerating. Really, there's four of them that we focused on. The first is the future of work. So we have, for example, things like video conference, but we're also focused on how the changes in remote have facilitated things like automation and the automation revolution. We have genomics and telehealth, which many of us have now actually had a Teladoc (TDOC +4.17%) appointment at some point over the last few months. The number of people that use the services is up something like four or five times what it was last year, and now we're getting news about vaccines where messenger RNA in genomics really play a prominent role. The third area is digital consumer and that gets to social media streaming, gaming, and the explosion of e-sports throughout the pandemic. Then the fourth is food revolution, which is one that we think is a little different and people perhaps don't hear as much about. But we saw beef prices go through the sky and it was the largest increase prices the USDA had ever recorded back when we were seeing the shutdowns and trying to ensure the supply chain. If we actually step back, there is a really interesting story to tell about innovation in the food space that we think investors should be paying attention to.
Cardina: Absolutely. We're going to talk about all these different trends. We're going to dive into some of the specific stocks that the ETF holds within the category and chat about why these trends are likely to endure beyond the pandemic. Before we jump into all that though, we've had exciting vaccine news this morning. So I don't want to ignore that. I think my question for you is, was this ETF designed for this current new normal? How do you think these trends are going to endure once a large segment of the population does become vaccinated? Some of these things may not be exactly where they are today, how do you picture this on the longer time horizon?
Helfstein: Let me stress, first of all, I look forward to the day when we get a vaccine. I'm a proud New Yorker and we were out at a restaurant that was near empty last night and look forward to the days where the economy reopens. This is not a COVID doom and gloom type of a fund, but many of the things that have happened are likely to stay with us. For example, we saw the number of people working from home, the percentage of the population increase from 7% to 42%. That's a six-fold increase. We cannot, by the way, have another six-fold increase. We can't have 252% of people working from home. We can't do that and we might have peaked at 42 or 49.There are some different statistics that are out there and that might well start to revert as offices reopen, and we would expect that to be the case. Yet, more than 50% of senior executives are talking about making some flexible work schedule permanent and so people are not in the office five days a week, and a recent Cisco (CSCO +4.79%) poll, 53% of senior executives said that they were looking at reducing their office space. Even a 20% reduction in office space could be somewhere in the neighborhood of 500 billion to a trillion dollars of cost savings that will probably be redirected to things like customer relationship management software, artificial intelligence, automation, video conference. We don't necessarily see many of these changes as receding. We think that there will be a permanent part of the landscape and really what we're focused on is where do we go over the next 10 years? Not the next 10 months.
Cardina: Absolutely. I think we've gotten a taste of a lot of these things because of the circumstances, but something like telework, I've realized that my job can be done 100% remote. Something like telehealth, once you have been able to log onto a video and see your doctor from your couch, that may be something you're interested in doing even when there's not a pandemic just because you've experienced the convenience. I definitely see where you're going with that.
Helfstein: Similarly across all these areas, another one is online retail and I imagine we'll want to jump into some of the names there, but we saw e-commerce as a percentage total retail sales go from 11%to 16%, and new numbers should be out at some point this week. But to give everybody context, it took 10 years to go from 5% to 11%. It took a decade to reach 11% penetration. Ten years. So for all the people who think that Amazon is taking over everything, all of e-commerce is still only 16% of the pie. That doesn't suggest to me that all of a sudden, it's going to go back to 11. There's a whole lot more that it's going to capture and so it's just going to expand, not recede.
Cardina: Absolutely. All right. I have some questions for you about the ETF and how it was designed, and then we'll get into some of these juicy stock names. My first question is, how do you expect this ETF to behave? How might it compare to the broader market in terms of volatility?
Helfstein: So when you look at the NASDAQ, for example, 85% of the NASDAQ weight is in technology, consumer discretionary, and communication services. Certainly, as we think about things like future of work, a lot of those elements play in similarly on the discretionary with the digital consumer. Nonetheless, when you add in food and you add in genomics and telehealth, that has a little bit more of a staples traditional defense quality to it. What we've done is we have weighted each of the four themes equally. Twice a year, we'll reconstitute to 25% per theme, and so we think that that's a way to balance. While I can't say I would expect it to be necessarily more or less volatile than a broad index, it has elements of diversification with 143 names currently in the basket, that is, I think a little bit more balanced is the right way to phrase it.
Cardina: Absolutely. What type of investor might consider this kind of ETF? Would you say this is good for someone who's looking for growth, value, diversification? Any thoughts there?
Helfstein: I think it first and foremost falls into the growth category. We really focused on areas where there is an increasing size of the pie, if you will. For example, if you're talking about something like industrial automation, U.S., Europe, China, and Japan will have, based on current worker utilization rates, 125 million shortfall of workers by 2040. If one robot can do the job of four workers, we need 31 million industrial and commercial robots, and there's three million in the world today. Those are the types of things that we're looking at, where the pie is expanding. First and foremost, investors focused on growth should think about this. Our overarching theme here is one of transformational change. For us, those are rapid, high in magnitude, and things that are very hard to reverse out of, turn back the clock. Really anybody looking for a growth sleeve and we think actually that this could fall into someone's core portfolio, within their equity sleeve as their growth alternative. Perhaps different than a Russell Growth Index that's a little bit more focused. Also people who take a core-satellite approach, this is a reasonable, dramatic satellite.
