FINSUM + Magnifi: 6 ETFs to Buy as Spending Recovers
(September 2020)
Now that many signs are pointing to an improving US economy, some investors think it is time to shift out of growth stocks and into more cyclical sectors. That said, cyclicals—which rely on consumer spending improvements—are going to be a hard place to invest because of the highly variable recovery path for different sectors created by COVID. With that in mind here are a few places to look: transportation (excluding airlines), such as the iShares Transportation ETF (IYT); or infrastructure, like the Global X Infrastructure Development ETF (PAVE); e-commerce and home entertainment, such as the Amplify Online Retail ETF (IBUY); or housing, either through single names like Home Depot and Lowe’s, or a broader homebuilders ETF like the SPDR S&P Homebuilders ETF (XHB).
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FINSUM + Magnifi: Morningstar Says Plans are in Motion for Overturn of Reg BI
(September 2020)
2020 has seen both the implementation of the SEC’s new Reg BI rule as well as the introduction of a new DOL Fiduciary Rule proposal. While both have faced opposition on all sides, it was uniformly less intense than the scorn the first fiduciary rule received. That said, Morningstar is reporting that plans are underway to scrap the new Reg BI rule, which only became official in June. More specifically, Biden is planning to scrap both rules if he takes office. That is obviously still a very big if, but the process is quite clear. Biden would appoint a new head of the SEC, who would then scrap the rule. Or, the Dodd-Frank act could be amended to make clear a full fiduciary rule needs to be in place.
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What Investors Need to Know About Minimum Volatility Funds
When the economy tanks, most people don’t rush to spend the cash left in their wallets on lottery tickets. So, why is “more risk equals more return” still such a common investing misconception?
FINSUM + Magnifi: These Tech Stocks are Still Worth Buying
(September 2020)
As a whole, the tech sector has performed splendidly during COVID. It is not just FAAMG either, numerous names across the board have seen big jumps. Investors are nervous about such high valuations, but some of the stocks’ underlying businesses justify the growth and even deserve more investment. One place to look is in advertising, which KeyBanc Capital Markets considers a “second derivative” to e-commerce growth. Accordingly, Facebook, Pinterest, and Snap seem like good buys and continued 20-30% growth looks likely. Content plays also look promising, for example Roku, which has under-appreciated monetization channels.
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FINSUM + Magnifi: The Best Way to Invest in Tech Right Now
(September 2020)
Tech mega caps have been beaten up over the last couple of weeks, but their valuations still feel staggering high and risky. That said, technology growth stocks seem like a good bet. So where is the best place to invest? The answer appears to be a diversified approach to the kinds of tech that will succeed during COVID, not just FAAMG. One way to think about this is the kind of companies that will benefit from the growing use of shared technology, infrastructure and services, internet-based products, new payment technologies, big data, the internet of things, and social media.
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FINSUM + Magnifi: Watch Out for the New DOL Rule’s Nasty Surprise
(September 2020)
Generally speaking the wealth management industry has been fairly placid about the new fiduciary rule. The current version of the DOL rule is significantly watered down from the then-apocalyptic first version. It is mostly consumer protection groups who are fighting it. However, within the rule is a nasty surprise—for the insurance industry. Independent insurance agents are likely to be very harmed by the rule because they will become de facto fiduciaries, making their role significantly more complicated. Insurance IMOs (independent marketing organizations) will also become very complicated from a regulatory perspective. Ironically, this will likely benefit the wealth management space generally.
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FINSUM + Magnifi: How Failing Stimulus Plans Could Stoke Volatility
(September 2020)
One of the things the market has been banking on is a new fiscal stimulus package from the government. In particular, Congress has been squabbling over a new package for several weeks and now seem to be further apart than ever. The situation has grown so bad that the conversation is turning more towards blame than the typical narrative of “a package will be coming very soon”. In many ways the economy is relying on such a deal and that is why it is so crucial to markets. Tens of millions of Americans are going to need aid in order to carry on like they did pre-COVID, and if a stimulus deal does not appear, the country risks a much deeper recession than if stimulus were to arrive.
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FINSUM + Magnifi: How to Protect Against Market Risk with ETFs
(September 2020)
Markets have been very bumpy lately, and many think the topsy-turvy nature of stocks will continue until the election. Therefore, investors may want some protection from the volatility. With that in mind there is a breed of ETFs that specialize in exactly that. Many different providers offer such ETFs and there are different methodologies for doing so. One of the most common and effective is simply to track an index of the stocks with the lowest volatility over a set time period, for example the preceding twelve months. Some of the funds in this area include State Street’s SPDR Large Cap Low Volatility Index ETF, the Invesco S&P Low Volatility ETF, and the iShares Edge MSCI USA Min Vol Factor ETF.
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FINSUM + Magnifi: Stocks May Drop Big on New Vaccine Shortage Announcement
(September 2020)
Ask yourself what is really keeping market and economic expectations aloft (besides the Fed). Very quickly most will realize that it is the expectation that a COVID vaccine will be available sometime before the middle of next year, which would ensure a smooth recovery by allowing everything to “get back to normal”. Therefore, disruptions to that assumption can be very damaging, which market volatility around vaccine news has already proved. Well, big news has just come out on that front: the largest producer of vaccines has just said there will not be enough vaccines for everyone until 2024. The CEO of the Serum Institute, the largest producer of vaccines in the world, said that the vaccine will most likely be two-dose, meaning that 15 BN doses would be needed to protect the whole world. “I know the world wants to be optimistic on it . . . [but] I have not heard of anyone coming even close to that [level] right now”.
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Adtech
Advertising in 2020 is way more than a billboard on the side of a highway these days. When it comes to catching consumer eyeballs, it’s personal.
As consumers, we know it well. We can’t scroll to a news site, or any site for that matter, without a barrage of ads that may or may not be tailored to our interests. And it’s true— thanks to advertising technology, advertisements are more targeted than ever.
Adtech is a relatively new industry that has become part of the fabric of the modern world, and it’s only just begun.
For consumers these days, the constant ads are the price of free, and so mostly, we accept it. After all, we aren’t paying for Google search, for Facebook, or to watch our favorite show on YouTube.
The internet-based services that have become so ingrained in our daily lives learn about us so that they can most successfully serve us ads and use those dollars to provide their services. This is especially true since the coronavirus pandemic shifted so many “in-person” norms to virtual experiences.
It’s a crazy world we live in, and for all of the unknowns, we can rest assured that advertising isn’t going away anytime soon.
What Is Adtech?
Advertising technology (or adtech) is driven by what’s called programmatic advertising. If that sounds more like an AI algorithm than a sales team, that’s because it is.
Programmatic advertising is “the real-time buying and selling of ad inventory through an automated bidding system. Programmatic advertising enables brands or agencies to purchase ad impressions on publisher sites or apps through a sophisticated ecosystem.”
And while we all gasp at how expensive Super Bowl commercials are every year, we don’t always consider how companies try to get in front of their target audience 365 days per year while consumers watch, click, and scroll throughout the day.
Programmatic advertising includes display ads, video ads, social ads, audio ads, native ads, and digital out-of-home ads. It’s at play whether we Google something random or tune into the season finale of our favorite show.
Consumer ad fatigue has simply led to more creative ways to grab interest. For example, native ads appear to be part of the media they appear on, rather than stand out like a pop-up or a banner ad.
The Economist famously used programmatic advertising to tap into an entirely new audience. In one campaign, it generated 650,000 new prospects with a return on investment (ROI) of 10:1 and increased awareness by almost 65%.
How did it achieve such success? It referenced subscriber, cookie, and content data to identify audience segments (finance, politics, economics, good deeds, careers, technology, and social justice), creating more than 60 ad versions to target potential customers effectively.
No longer was The Economist considered a dry, intellectual journal by most. Instead, it had new relevance. What’s more, it had new readers.
Adtech isn’t limited to the internet. For example, how many people have you heard at least consider ditching cable and just using streaming services? Meet connected TV, which is anticipated to grow to reach 204.1 million users by 2022 according to eMarketer.
As subscribers to services including Netflix, Hulu, Amazon Prime, and Disney Plus have increased, so have over-the-top (OTT) advertising dollars to the tune of $5 billion in 2020. These ads are typically highly personalized according to a viewer’s interest and cannot be skipped, but rather must be viewed to continue consuming content.
Ads on our computers aren’t the only adtech at play. Digital out-of-home advertising includes the high-tech billboards, on-vehicle ads, etc. Where online advertising can feel nagging, outdoor advertising is innovating in a way that appears interesting and grabs attention. According to IBIS World, in 2019 billboard advertising revenue grew by more than $8.6 billion in advertising revenue.
Why Invest in Advertising Technology?
Lots of companies these days don’t necessarily run on our dollars, they run on our eyeballs, and our clicks. According to VentureBeat.com, “all major ad-supported tech companies are ad tech companies. They market advertising technology and use technology to support their advertising businesses.” This includes Facebook, Google, Pinterest, and Reddit.
Adtech is the way of the future, especially as technology evolves and consumers become increasingly glued to screens. In addition to enhanced targeting capabilities, programmatic advertising gives companies real-time insights, enhanced targeting capabilities, greater transparency, and better budget utilization.
Advertising is part of the fabric of our modern culture. Because companies can use platforms to serve us advertisements, we have access to tons of information and entertainment for no cost. As a consumer, it’s hard to ignore.
It’s not just Google searches and websites that are ideal for digital ads. “In-game brand advertising is set to see tremendous growth in the coming years,” says Ajitpal Pannu, CEO of Smaato, an adtech platform. “We are building up a strong foundation to support this new media channel.”
COVID, interestingly, has moved more eyeballs on screens than ever before. And while advertising spending is down across the board as companies move to save money, adtech spending is bound to rebound, making now an ideal time to invest.
How to Invest in Adtech?
Advertising is by nature a very broad industry. Just about every company advertises in some way, and the technologies driving those activities are all over the map. Fortunately, a search on Magnifi suggests that there are a number of ETFs and mutual funds to help interested investors access the growing adtech sector without having to invest in many different companies.
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The information and data are as of the September 14, 2020 (publish date) unless otherwise noted and subject to change. This blog is sponsored by Magnifi.
