This article is a part of InvestorPlace’s Best ETFs for 2019 contest. Robert Waldo’s pick for the contest is the Pacer Benchmark Data & Infrastructure Real Estate ETF (NYSEARCA:SRVR).
This year was a tough one for many investors. Countless stocks — and exchange-traded funds — got hammered as the tech space took a massive hit in October, fears regarding the U.S.-China trade war intensified and spooky signs of a looming rescission appeared in the shape of an “inverted yield curve.”
Although my pick for last year’s ETF contest — ETFMG Video Game Tech ETF (NYSEARCA:GAMR) — started 2018 strong, it is currently down 17% with less than two weeks to go, and toward the bottom rung of the contest. I still believe in the long-term concept behind this video-game-based ETF, but with the New Year on its way, I’ve chosen a different play for the InvestorPlace Best ETFs 2019 contest: Pacer Benchmark Data & Infrastructure Real Estate ETF (NYSEARCA:SRVR).
My belief in the strength of the SRVR ETF is multifaceted — partly related to the end-of-year drama in 2018 but also the more cheerful opportunities in several hot, tech-related innovations.
Is This Oddball 5G ETF Worth a Look?
As its name implies, this real estate investment trust (REIT) ETF focuses on the data and infrastructure space. In plain English, that means it allows investors to tap into real estate opportunities that will play a key role in the rollout of 5G, which is expected to start in full force in 2019.
For those who don’t know, the adoption of 5G will be significant for the future of autonomous vehicles, the development of smart cities and the long-term success of countless Internet of Things (IoT) technologies, to name a few. As InvestorPlace advisor Matt McCall asserts in his recent article about two IoT stocks to buy, when you think of IoT (and by extension 5G), it’s not just about your fancy home devices or your self-driving car, but other spaces like healthcare as well. Investors need to keep this grand scope in mind when considering the long-term implications for any company involved in these 5G-related technologies as well as the infrastructure that enables 5G more broadly.
Although claims that 5G will be the “advent of the fourth industrial revolution” may be premature, it’s clearly tied to the future of how the world will operate for years — and maybe centuries — to come. It’s not just a mere upgrade to the connectivity of your smartphone. As such, the little-talked-about SRVR ETF has long-lasting promise that isn’t directly tied to the ups and downs of most tech stocks, but still connected to the overarching themes and technologies many companies will employ to shape our hyper-connected future.
But this big-picture potential isn’t the only aspect that makes a 5G ETF like SRVR so darn appealing.
SRVR ETF Reduces Exposure to Volatility Too
As mentioned earlier, investors are — rightfully — spooked amid all the market turmoil that we were hit with in the later half of 2018. It’s times like these that many investors seek stability and income in dividend stocks.
One of the reasons I’m picking the SRVR ETF for this “Best ETFs” contest is that its design as a REIT ETF grants investors general protection from this volatility (note that while most ETFs from the 2018 contest are in the red year-to-date by double-digits, SRVR still managed to make some gains), while simultaneously tapping into all the benefits that will be realized by hot innovations like the roll out of 5G in 2019.
Simply put, supply is low and demand is high for all that’s needed to make 5G work. And SRVR’s holdings are the key to its implementation. Nearly 50% of the SRVR ETF is made up of companies like global communications owner and operator American Tower (NYSE:AMT), U.S.-based communications infrastructure company Crown Castle (NYSE:CCI) and internet services company Equinix (NASDAQ:EQIX). Each of these companies will have a significant role in the widespread adoption of 5G in the years ahead.
While 38.8% of the SRVR ETF is comprised of infrastructure REITs, some of its other top holdings, like Iron Mountain (NYSE:IRM), fall into the Data Center category, of which 27.26% of SRVR’s holdings fit into. Such companies are also tied to the development of 5G and other hot tech-related themes as well.
Although it’s not explicit diversification in that many of these holdings are tied into these central high-tech themes and not every company lives and dies on the 5G rollout or the adoption of autonomous vehicles, I see this as a benefit to the success of SRVR.
For example, IRM’s digital data and records management services are used (and will be continued to be used) by many companies, not just those involved with the catalysts that make the SRVR ETF appealing. This adds another layer of support to the ETF’s backbone as many of its holdings aren’t going away anytime soon, regardless of the success of 5G and related technological advancements.
Bottom Line on SRVR
It’s these holdings (and their longer-term prospects) that have enabled the SRVR ETF to stay afloat for most of 2018, despite all the tech-related chaos — it’s only down about 1% on the year. And it’s this general strength alongside the debut of 5G next year that makes SRVR one of the best ETFs to buy in 2019.
Whether the market continues to falter or things cheer up,the SRVR ETF should hold strong. And for all those reasons, I’m confident in SRVR’s chances to win the contest in 2019.
The SRVR ETF has an expense ratio of 0.6%, or $60 per every $10,000 invested, and a dividend yield of 3.4%.
Robert Waldo is an Assistant Editor for InvestorPlace. As of this writing, he did not hold a position in any of the aforementioned securities.
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