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Here's the ETF to watch as AMC shares surge

Todd Rosenbluth, Head of ETF and Mutual Fund Research at CFRA, joins Yahoo Finance to discuss how meme stocks are playing into ETFs and themes to watch as inflation concerns continues.

Video Transcript

ALEXIS CHRISTOFOROUS: All right. Time now for our ETF Report, brought to you by Invesco QQQ. Want to bring in Todd Rosenbluth, Head of ETF and Mutual Fund Research at CFRA.

So, hey, Todd, let's start with the talk of the town today, and this is those meme stocks, not just AMC. We're also seeing Bed Bath and Beyond and a handful of others once again going through the roof. How is that playing into what you're seeing with regards to ETFs?

TODD ROSENBLUTH: So ETFs are not large owners of AMC. There's about 30 or so ETFs, according to our CFRA data, that have ownership of AMC. But the one ETF that's caught our eye is the ticker is PEJ. Its Invesco's Dynamic Entertainment and Leisure ETF. It's a collection of 30 stocks that actually have been benefiting from the more, the reopening environment. So you have companies like Chipotle, you have companies like booking.com, companies like Disney that are benefiting as consumers are looking to spend more money with their pockets.

But AMC, as of yesterday, was a 10% weighting. The stock is obviously up sharply today. So if we close at anywhere close to these levels, it will be much higher, perhaps 15% to 20% of the overall portfolio. So this is an ETF that gained a lot of ground, gained a lot of interest in January and February. It added AMC, because it has a momentum characteristic, to its portfolio construction. So the prior stock performance that drove AMC into the known from the meme perspective, had to get it added to the portfolio, and now it's benefiting, and then some, PEJ is obviously benefiting today from its ownership of AMC.

ALEXIS CHRISTOFOROUS: Yeah, you know, Jared Blikre was just talking about how he watches PEJ sort of as a bellwether for leisure and entertainment. Want to talk about some other themes that you are seeing right now, Todd. I mean, as investors seem to be bracing for higher inflation and they're making some moves in the portfolio, we keep hearing from strategists that financials are a place you're going to want to look, because we might start to see interest rates move higher as inflation moves higher. Are you seeing that playing out in the appetite for ETFs?

TODD ROSENBLUTH: So we're seeing that in a couple of ways. One, we're seeing financial ETFs gain ground. XLF, the Financial Selector Sector SPDR, was a top five net inflows this year. We've also seen regional banking ETFs be popular. But what we've also seen is, because of the price momentum of financial stocks, the largest momentum ETF, Invesco's-- I'm sorry, not Invesco, iShares USA-- I'm sorry, USA Momentum ETF, MTUM, shifted from having about a 1.5% weighting in financials to over 30% weighting when the rebalance took place last week.

And so it added names like Wells Fargo and Bank of America and JPMorgan to the overall portfolio, shifting away from some of the more growth-oriented stocks, like Amazon and Apple and Microsoft. So financials is now the new momentum. We're seeing that across the board within the portfolios, in addition to it being a very heavily weighted, from a value perspective. Some of the larger value-oriented ETFs have high exposure to the financial services sector.

ALEXIS CHRISTOFOROUS: I want to talk more about that rotation from growth into value. I feel like we talk about it every day here. Are you continuing to see that? And who are some of the big value ETF winners at the moment?

TODD ROSENBLUTH: So yes, we are continuing to see that. Value-oriented ETFs have been gaining popularity, in part because the stocks have gone up considerably stronger than the growth part of the portfolio. One of the ETFs that we at CFRA are highlighting is RPV. This is the Invesco S&P 500 Pure Value ETF. It takes the deepest value-oriented stocks within the S&P 500 on an annual basis.

Coming into this year, that was certainly financial companies, life insurance companies, in particular, but some heavy, relatively high exposure to energy companies and automakers, like Ford and GM, are part of the portfolio. And we're seeing that ETF do very well both in performance, it's up over 30% as of this prior weekend, it's also doubled in overall size because of over a billion dollars of net inflows. And we at CFRA still think this is attractive. This is our focus ETF for the month of June. We think it's going to outperform over the next nine months.

ALEXIS CHRISTOFOROUS: All right. Todd Rosenbluth, Head of ETF and Mutual Fund Research at CFRA, thanks so much for bringing your picks with us, as always.