If you’re a growth investor, the 5G sector is something that you cannot ignore.
Just take a look at the chart below. It shows the performance of a Nasdaq-listed security since its inception in September 2016 (its name is revealed later).
While there could be many reasons behind a stock’s rally, I can tell you one thing with confidence: 5G could be a major catalyst to continue driving the upward momentum in this particular security.
As you can see in the following chart, the stock has made solid progress since its debut. Its climbs have been steady and its trading volumes have been solid. And while there have been some pullbacks, this stock has always managed to bounce back.
Chart courtesy of StockCharts.com
What’s particularly worth noting is that, even during March’s pandemic-induced sell-off, this stock made a rapid V-shaped recovery and quickly went on to climb to new highs. Right now, the stock is above both its 50-day and 200-day moving averages.
Now, here’s the surprise: the impressive performance we’re seeing is not from a stock in the traditional sense. Instead, we’re looking at the chart of Global X Internet of Things ETF (NASDAQ:SNSR).
An exchange-traded fund (ETF) is a collection of securities—such as stocks—that often tracks an index. ETFs trade on stock exchanges, so investors can buy and sell them throughout the trading day, just like they would with regular stocks.
As its name suggests, Global X Internet of Things ETF is made up of companies that stand to benefit in the Internet of Things (IoT) era. To be specific, the fund aims to track the investment returns of the Indxx Global Internet of Things Thematic Index.
While SNSR stock does not have the term “5G” in its name, it’s pretty clear why it can also benefit from the increasing adoption of 5G technology.
Under 5G networks, data can travel at speeds up to 100 times faster than under 4G networks, and latency can be reduced to as low as one millisecond. Therefore, the enhanced connectivity of 5G networks will help turn many potential IoT applications into reality.
According to SNSR ETF’s most recent fact sheet, it holds a portfolio of 47 stocks, with its top industry exposures being:
- Semiconductors (35.2%)
- Electrical components and equipment (14.8%)
- Technology hardware, storage, and peripherals (10.8%)
- Security and alarm services (6.8%)
- Consumer electronics (6.67%)
(Source: “SNSR,” Global X ETFs, last accessed November 13, 2020.)
Global X Internet of Things ETF is also a global fund. While the U.S. is the fund’s biggest exposure, about half of its net assets are invested internationally. For instance, you can find Swiss semiconductor manufacturer STMicroelectronics NV (NYSE:STM) and Chinese smartphone maker Xiaomi Corp (HKG:1810, OTCMKTS:XIACF) among the fund’s top 10 holdings. (Source: “SNSR Internet of Things ETF,” Global X ETFs, last accessed November 13, 2020.)
One of the reasons some investors like ETFs is that they’re a very convenient way to get exposure to a diverse portfolio of stocks. And investors don’t need to worry about individual stock picking because the portfolio is updated automatically.
In the case of the Indxx Global Internet of Things Thematic Index—the underlying index of Global X Internet of Things ETF—it follows an annual reconstitution and rebalance schedule and is also reviewed semi-annually for new initial public offerings (IPOs) and for corporate actions. (Source: “Indxx Global Internet of Things Thematic Index,” Global X ETFs, last accessed November 13, 2020.)
Of course, like most funds, SNSR ETF charges a fee—its total expense ratio is 0.68%.
Global X Internet of Things ETF has delivered a total return of nearly 80% since its inception just over four years ago.
As 5G networks continue to be deployed around the world, I wouldn’t be surprised to see companies in this IoT-focused fund outperform the market. For 5G investors, SNSR stock is worth considering.