Having debuted last June, the O’Shares Global Internet Giants ETF (NYSE: OGIG) is one of the newest Internet exchange traded funds listed in the U.S.
Youth aside, OGIG is setting a torrid pace in 2019 with a year-to-date gain of just over 28 percent.
OGIG's stellar performance to start 2019 may imply investors have missed out on some easy money, but a confluence of factors, including the ongoing e-commerce boom, support long-term upside for OGIG. The fund tracks the O’Shares Global Internet Giants Index.
OGIG itself is “designed to provide investors with the means to invest in some of the largest global companies that derive most of their revenue from the Internet and e-commerce sectors that exhibit quality and growth potential,” according to O'Shares.
Why It's Important
On its own, OGIG's 2019 gain of 28.05 percent is impressive, but that performance is even more impressive when considering the O'Shares fund is beating the First Trust Dow Jones Internet Index Fund (NYSE: FDN), the largest U.S.-listed Internet ETF, by almost 600 basis points.
One of the obvious reasons why OGIG is trouncing its rival is China. The O'Shares ETF has exposure to Chinese e-commerce and Internet stocks while the rival FDN solely focuses on U.S. companies. That is an important distinction when considering China had 2018 e-commerce sales of $1.3 trillion compared to $513 billion in the U.S.
“The rapid adoption of e-commerce in China has helped fuel regional dominance from Asia-Pacific,” according to O'Shares research. “In 2010, Asia- Pacific accounted for only a third of total e-commerce. As of last year, that proportion had grown to 60%. North America and Europe comprised a total of 36%, at 21% and 15%, respectively. By 2021, Asia-Pacific’s share of global e-commerce is projected to grow to 67%.”
In terms of what's next for OGIG, likely more growth on the e-commerce front and China will be leading that charge. Last year, online retail sales accounted for 22 percent of all Chinese retail sales.
“In China, Alibaba holds a one day online retail event called Singles Day, which is even larger than Black Friday and Cyber Monday combined,” said O'Shares. “Over 24 hours, Alibaba’s sales exceeded $30 billion, up over 25% compared to 2017.”
Alibaba Group Holding Ltd. (NYSE: BABA) is OGIG's third-largest holding at a weight of 6 percent.
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