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Reasons To Investigate This Internet ETF

August 30, 2019 12:46 pm
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Reasons To Investigate This Internet ETF

Over the course of the bull market, internet stocks have been favorite destinations for investors seeking growth and momentum. That faith has largely been rewarded, as some internet exchange traded funds are among the best-performing ETFs over the past decade. Yet the group is still growing and offers favorable long-term fundamentals.

What Happened

The O'Shares Global Internet Giants ETF (NYSE:OGIG) is just over one year old, but the fund is already putting its stamp on the internet ETF space.

The fund targets the O’Shares Global Internet Giants Index and “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 revenue from the internet and e-commerce sectors that exhibit quality and growth potential,” according to O'Shares.

Why It's Important

While OGIG features significant exposure to usual suspects such as Alphabet Inc (NASDAQ:GOOG) (NASDAQ:GOOGL), Amazon.com, Inc. (NASDAQ:AMZN) and Facebook, Inc. (NASDAQ:FB), the ETF's international exposure is meaningful, particularly for long-term investors.

“Asia and Africa on the other hand,have populations exceeding 4 billion and 1 billion, respectively, accounting for over 70%of the world’s population but have much lower adoption rates,” according to O'Shares.

Only half of Asia is online, and that proportion drops to nearly one-third for Africa.

"As internet adoption rates in Asia and Africa converge with developed markets, growth in internet and e-commerce will likely follow suit," O'Shares said. 

OGIG allocates over 26% of its weight to Asian equities, and that difference is impactful, because OGIG is outpacing the largest internet ETF — which is comprised solely of domestic stocks — by about 1,000 basis points this year.

What's Next

The growth of global e-commerce sales is another long-term tailwind for OGIG, and with online retail surging in markets outside the growth, that growth could propel this ETF to more outperformance of rival funds.

“E-commerce as a percent of total retail sales was~7% in 2015 and is forecasted to double by 2020 to over14%,” said O'Shares.

“The U.S. accounted for an estimated 18% of the market in 2018, with China and reest of world at an estimated 46% and 36%, respectively.”

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