An Internet of Things ETF For IoT Investors

1. An Internet of Things ETF For IoT Investors Long-time readers of Nanalyze know that one of our oft-repeated pieces of wisdom and remember what they say about opinions and particular anatomical parts is that one of the best ways to get skin into the game for any particular technology theme is through an Exchange Traded Fund (ETF). We recently profiled a couple of robotics and artificial intelligence ETFs, but you can pretty much find an ETF for just about any theme imaginable, including cannabis, the Bible or gay pride. For more information visit: https://www.indxx.com/home/calculation The idea behind an ETF is that it provides exposure to a basket full of companies that are somehow linked to the overarching theme. On the plus side, it provides far greater diversification than you can get by investing in just one or two stocks. Often, however, we find many ETFs just stretch the bounds of what might actually qualify under a particular theme, minimizing pure-play exposure (we talked about what “pure-play” means in our last article). For example, we found that the First Trust Nasdaq Artificial Intelligence and Robotics ETF (ROBT) seemed to diverge pretty starkly from its theme while the top 10 stocks that make up Global X Robotics & Artificial Intelligence ETF (BOTZ) seemed to offer more pure-play exposure. In either case, both ETFs were dramatically different showing just how different opinions can be about what exactly is “pure play” for any given investment theme. We were interested to discover that Global X also offers an Internet of Things ETF called, imaginatively enough, Global X Internet of Things ETF (NASDAQ:SNSR). The fund tracks the Indxx Global Internet of Things Thematic Index which contains 44 stocks and has performance history back to 2010. The Internet of Things encompasses quite a wide variety of technologies involved in connecting sensors and machines to other machines to create increasingly complex webs of connected devices for automation and other purposes. One of the most basic examples is having your thermostat, locks or lights in your home digitally connected to respond to certain conditions or by voice command. A more complex setup might involve a farm with various sensors in the field that continuously relay data, usually through a cloud-based platform, about the health of the crops. All of that takes chips, electronics, wireless infrastructure, not to mention cool consumer products that look like they could zap you with a laser. An Internet of Things ETF SNSR has a pretty short history, as it only came online back in September 2016. The underlying index, however, has history from 2010 so we can compare it to the overall market.

2. If you would have invested $1000 back on 06/30/2010 when the index began tracking, then today you would have about $3,255 without taking into account any fees. That’s a return of about +226% and certainly beats the S&P500 return of +151% over the same time frame. If however, we just invested in the tech-heavy Nasdaq using a tracker ETF like QQQ, we would have a return of about +252%. In this case we see that the IoT index isn’t outperforming the Nasdaq, so what are we paying management fees for then? Speaking of which. SNSR charges an above-average management fee of 0.68%, while it only has about $110 million of assets under management. The index does a pretty good job of ensuring its top 10 stocks, which account for more than half of its 45-stock portfolio at 53.52%, are in the same playing field as IoT, despite being a somewhat amorphous category. More than 60% of the companies fall into the somewhat unsexy categories of semiconductors and electrical components. Chip Off the Block Intel, of course, is one of the largest, if not the biggest, semiconductor chip maker in the world. Like many chip and electronics manufacturers, Intel seems to have jumped on the IoT gravy train, listing the Internet of Things as one of its core technological offerings. The same goes for other chip makers on the list such as STMicroelectronics (NYSE:STM), a Swiss company that says it focuses on smart driving and IoT solutions. We came across them years ago on a story about Micro Electro Mechanical Systems. Skyworks Solutions (NASDAQ:SWKS) out of the Boston area targets areas as diverse as autonomous cars and smartphones. Both carry a market cap of about $17 billion, which is pretty small potatoes against Intel’s $228 billion market cap. Other chip makers weighing heavily on the portfolio include Silicon Lab.