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Internet ETFs to Keep Soaring Amid Coronavirus Crisis

Sweta Jaiswal, FRM

The coronavirus outbreak continues to aggravate in the United States as it recorded 35,112 new cases and 445 virus-related deaths on Aug 17, according to data from Johns Hopkins University. The world’s largest economy has already seen more than 5.4 million coronavirus cases along with at least 170,000 fatalities. Per a CNN report, around 189,000 coronavirus deaths in the United States are currently expected by Sep 5, with a possible range of 181,375 to 201,431 deaths, according to an ensemble forecast published by the US Centers for Disease Control and Prevention.

The second half of 2020 is expected to keep facing the brunt of the pandemic as the second wave of the outbreak is gathering steam.In the current scenario, 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.

New Normal to Stay in 2H20

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. The work-from-home model has bumped up sales of PCs, laptops and other kind of computer peripherals.

More and more people are spending time at home, in keeping with social-distancing guidelines due to the pandemic. Going by Nielsen’s latest Total Audience Report, as of this year’s second quarter, streaming accounts for one-fourth of all television minutes viewed. It has increased from the 19% share of TV minutes that streaming accounted for in fourth-quarter 2019.

As a result, people 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. Overall, Americans watched an average 142.5 billion weekly streaming minutes last quarter compared with 81.7 million hours in the second quarter of 2019.

It is also observed that the coronavirus-induced lockdown boosted demand for video games. Per market researcher NPD, consumers spent $11.6 billion on video game hardware, software and accessories during the second quarter, up 30% year over year and 7% from the first quarter, when spending had hit $10.9 billion. Most of the spending comes from video game content, which saw a 28% year-over-year increase to $10.2 billion on the back of gains across digital console, mobile, subscription spending and new physical games.

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. It’s largely because the pandemic brought about some changes in lifestyle and influenced Americans’ preferences.

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. According to a new report by eMarketer, total U.S. retail sales are projected to decline 10.5% this year, with a 14% drop in brick-and-mortar sales. However, e-commerce is poised to grow 18% (following a 14.9% gain in 2019), which reflects a notable increase in both the number of digital buyers and the average spending per buyer.

Internet ETFs to Continue Rising

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

The fund seeks investment results that correspond generally to the price and yield of the Dow Jones Internet Composite Index. It has amassed $9.69 billion in assets and charges 52 basis points (bps) in expense ratio. The fund has a Zacks Rank #2 (Buy) with a High-risk outlook (read: Cisco ETFs in Focus on Q4 Earnings Beat and Weak Outlook).

ARK Next Generation Internet ETF ARKW

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 $1.99 billion, with an expense ratio of 76 bps. It has a Medium-risk outlook (read: 5 Sector ETFs That Have Gained More Than 50% This Year).

Invesco NASDAQ Internet ETF PNQI

It is based on the NASDAQ 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 $780.2 million in assets and charges 62 bps in expense ratio. The fund has a Zacks Rank #2, with a High-risk outlook (read: Red Hot ETF Areas Amid the Coronavirus Crisis).

O’Shares Global Internet Giants ETF OGIG

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 $372.9 million, with an expense ratio of 48 bps (read: 4 ETF Investing Styles for Q3).

Global X Internet of Things ETF SNSR

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 $227.7 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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