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 (NYSEMKT:ANEW). He shared plenty of tips that all kinds of investors can apply to their own portfolios.
Corinne 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?
Scott 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 3 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.
Cardina: Great. Let's talk about time periods. At the Fool, we are really long-term investors. When we're looking at the shorter side of things, we're looking at three years to five years. What would you say is the ideal time period that an investor should aim to keep their money in this ETF to experience gains?
Helfstein: We think about it the same way as you guys do when it comes to our thematic baskets. For us, when we say theme, there's really three things that we tend to focus on. One is technological innovation. The second is demographic shift. The third is changing consumer behavior. Really this captures all of it. What we've seen in the last 10 months is that so many of these changes have just been accelerated so much faster than anybody believed possible. We're seeing these changes play out in a way that was really unimaginable, and yet, it still doesn't stop the fact that these are three years, five years, seven years, 10 years, in some cases, multi-decade themes. Food revolution and sustainable food with 2 billion more people according to UN projections by 2050. There's 177,000 new mouths to feed every day for the next 30 years. That is not a short-term trend. That is something that we are going to be grappling with and we're going to need to bring innovation to bear, in order to handle those. For us, this is a very long-term investment.