Internet ETFs Are Hot Picks Amid the Coronavirus Crisis

Sweta Jaiswal, FRM
·6-min read

The coronavirus pandemic has claimed more than a million lives globally. The outbreak is still spreading, with increasing number of cases being reported in the United States, Europe and India. In fact, warnings have been issued by health experts that the outbreak can get severe in the United States during the fall and winter, per a CNN report.

There is also uncertainty surrounding a vaccine. Going by sources, President Trump’s administration is believed to be building pressure on getting a vaccine approved before the elections in November. Meanwhile, the FDA has expressed intentions of not compromising with the vaccine’s quality, safety and efficacy standards when it comes to its decision of approval. However, according to another CNN report, Dr. Anthony Fauci, leading infectious disease expert,has commented that COVID-19 vaccinations could "very likely" begin in November or December.

However, investors should focus on opportunities for their portfolios that have popped up during the pandemic. Online activities are going to dominate the pandemic and post-pandemic era largely. The pandemic is believed to have changed the lifestyle and preferences of Americans and people globally. For precautionary reasons, people are trying to avoid public places and maintain social distancing. Most people are opting for cash less transactions wherever possible.

Thus, it seems like the rising work from home and online-shopping trend, increasing digital payments, growing video streaming and soaring video game sales are slowly becoming the “new normal.” With the new trends making way, Internet will continue to be a major requirement in daily lives.

Internet Becoming Integral Part of Lives

Strikingly, even as the rebooting of the U.S. economy happens in phases and social-distancing restrictions are being eased, people are increasingly opting for contactless operations. Most of the surveys have found that people are more interested in online shopping rather than visiting a brick-and-mortar store for their purchases of essential food items and supplies now.

In fact, U.S. online sales rose 42% year over year in August, according to the latest Adobe Analytics data. The rise was however at a slower pace than July when online sales soared 55% year over year, per the Adobe Analytics data. Since March, Adobe attributes the pandemic to an extra $107 billion spent online.

Moving on, with a rise in digital payments, the payments industry has been one of the beneficiaries from the pandemic so far. Also, Mastercard’s latest coronavirus consumer impact study reflects that more than 70% consumers plan to continue or increase their online purchasing and approximately 60% believe, they will use less cash even after the virus dies out.

Furthermore, cloud computing has emerged as a key technology and is keeping up with the growing work-from-home trend in the fight against coronavirus. It is supporting organizations in remotely processing a lot of information, developing and running key applications and services, and helping employees across the world collaborate while working.

Meanwhile, people confined at home are resorting to streaming platforms like Netflix (NFLX), Amazon Prime or Disney+ (DIS) or turning to social media platforms like Facebook (FB) and Twitter (TWTR) for in-house entertainment. Going by Nielsen’s latest Total Audience Report, as of this year’s second quarter, streaming accounts form one-fourth of all television minutes viewed. That’s quite a surge from the 19% share of TV minutes that streaming accounted for in fourth-quarter 2019.

Internet ETFs to Continue Gaining

Against this backdrop, let’s look at some Internet ETFs that will continue to gain from increasing demand for online gaming, shopping, video streaming and work-from-home trends due to the coronavirus crisis:

First Trust Dow Jones InternetETF FDN — up 35.3% year to date

The fund seeks investment results that correspond generally to the price and yield of the Dow Jones Internet Composite Index. It has amassed $9.91 billion in assets and charges 52 basis points (bps) in expense ratio. The fund has a Zacks Rank #1 (Strong Buy), with a High-risk outlook (read: 5 ETFs to Tap on Historic Rally).

ARK Next Generation Internet ETF ARKW — up 87.3%

It is an actively-managed ETF that seeks long-term growth of capital by investing under normal circumstances, primarily (at least 80% of its assets) in domestic and U.S. exchange traded foreign equity securities of companies that are relevant to the fund’s investment theme of next-generation Internet. The fund has AUM of $2.39 billion, with an expense ratio of 76 bps. It has a Medium-risk outlook (read: Tesla's 'Battery Day': Pain or Gain for ETFs Over Long Term?).

Invesco NASDAQ Internet ETF PNQI — up 44.5%

It is based on the Nasdaq CTA Internet Index. The fund will normally invest at least 90% of its total assets securities that make up the index. The index is designed to track the performance of the largest and most liquid U.S.-listed companies engaged in Internet-related businesses and that are listed on one of the major U.S. stock exchanges. It has amassed $846.1 million in assets and charges 62 bps in expense ratio. The fund has a Zacks Rank #2 (Buy), with a High-risk outlook (read: 5 ETFs To Buy At All-Time Highs).

O’Shares Global Internet Giants ETF OGIG — up 67.2%

The fund is a rules-based ETF designed to provide investors with the means to invest in some of the largest global companies that derive most of their revenues from the Internet and e-commerce sectors that exhibit quality and growth potential. The fund has AUM of $400 million, with an expense ratio of 48 bps (read: Stay-At-Home ETFs to Soar Further on New Lockdown Measures).

Global X Internet of Things ETF SNSR — up 10.4%

The fund seeks to invest in companies that stand to potentially benefit from the broader adoption of the Internet of Things (IoT), as enabled by technologies such as WiFi, 5G telecommunications infrastructure and fiber optics. This includes the development and manufacturing of semiconductors and sensors, integrated products and solutions, and applications serving smart grids, smart homes, connected cars, and the industrial Internet. It has amassed $224.2 million in assets and charges 68 bps in expense ratio.

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Invesco NASDAQ Internet ETF (PNQI): ETF Research Reports
ARK Next Generation Internet ETF (ARKW): ETF Research Reports
Global X Internet of Things ETF (SNSR): ETF Research Reports
First Trust Dow Jones Internet ETF (FDN): ETF Research Reports
OShares Global Internet Giants ETF (OGIG): ETF Research Reports
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