One of the big pluses of investing in exchange-traded funds (ETFs) is the broad-based exposure you get from a hot investment theme without necessarily having to pick a winner in a sector.
The three themes featured here -- copper mining, cybersecurity, and U.S. infrastructure spending -- are all highly attractive for long-term investors. Still, they also contain a lot of stock-specific risk.
That's why it makes sense for most investors to buy into the Global X Copper Miners ETF (COPX +0.15%), Global X Cybersecurity ETF (BUG +3.51%), and the Global X U.S. Infrastructure Development ETF (PAVE 0.43%). Here's the lowdown.
|
ETF |
Net Assets |
Expense Ratio |
Dividend Yield |
Number of Holdings |
|---|---|---|---|---|
|
Global X Copper Miners ETF |
$1.9 billion |
0.65% |
2.10% |
37 |
|
Global X Cybersecurity ETF |
$780 million |
0.5% |
0.1% |
26 |
|
Global X U.S. Infrastructure Development ETF |
$7.3 billion |
0.47% |
0.49% |
100 |
Data source: ETF presentations.
Global X Copper Miners ETF
The case for copper rests on the idea that rising demand from clean energy technologies, the trend of electrification of everything, electric vehicles (EVs) and charging networks, and data centers powering A.I. applications will put upward pressure on copper prices.
At the same time, as paradoxical as it sounds, the same environmentally sensitive push behind clean energy is often behind the movement to restrict copper mining permits. In addition, it takes time, multimillion-dollar investment, and permitting to bring a new copper mine into production.
NYSEMKT: COPX
Key Data Points
That said, picking a winner among copper mining stocks is not always easy, not least because many of them have assets in politically unstable countries. For example, my favorite copper mining stock is Freeport-McMoRan (FCX 0.61%). Still, it's not without political risk, as its mines in Indonesia and South America are subject to the risk of increased taxes and royalty payments.
The 37 holdings in the ETF (including Freeport-McMoRan) help to diversify that risk, as does the diversification in its country holdings, with 47% in North America and 5% to 10% each in China, Australia, Japan, and the U.K. It offers a less risky way to get exposure to the upside potential for copper miners to benefit from potentially rising prices.
Global X Cybersecurity ETF
There's little doubt that cybersecurity is a growth industry. All it takes is a major cyber event or two -- such as the recent attack on Johnson Controls -- to stimulate renewed interest in spending on it.
That said, it's a fast-changing field, and it's not easy for retail investors to stay abreast of which company is leading the next generation of cybersecurity threat prevention.
A quick look at the revenue growth of the top five holdings in the Global X ETF shows how explosive growth can be for individual companies.
PANW revenue (TTM) data by YCharts; TTM = trailing 12 months.
The other reason I like this ETF is that its 26 holdings are all in cybersecurity. By comparison, the two largest cybersecurity ETFs, the First Trust Nasdaq Cybersecurity ETF and the Amplify Cybersecurity ETF, have significant holdings in defense-focused companies. The former's top two holdings (over 13% of the fund) are in telecom/communication-focused Cisco and Broadcom, while the latter's top three (24% of the fund) are in Cisco, Broadcom, and defense-focused General Dynamics.
The Global X ETF is the best option for pure cybersecurity exposure.
NASDAQ: BUG
Key Data Points
Global X U.S. Infrastructure Development ETF
Ever since the signing of the $1.2 trillion Infrastructure Investment and Jobs Act, investors have been aware of the potential of infrastructure stocks -- specifically U.S.-focused infrastructure companies.
That said, infrastructure spending covers such a broad spectrum that it's challenging to pick one subsector from another. For example, this ETF's leading holdings are as diverse as railroads; industrial supply companies; heating, ventilation, and air-conditioning companies; steel; process automation, and materials companies.
It's a broad church with 100 holdings. Still, the overriding theme is to try to outperform the market by focusing on companies with exposure to infrastructure. With that exposure, you can think of this ETF as a combination of a correlated play on the broader market with the potential to outperform.
ETFs to buy
All three of these ETFs are excellent additions for investors looking to capture the upside potential of existing investment themes likely to outperform the market over the long term.
