New ETFs That You May Or May Not Be Able To Use


The first ETF to look at is the ProShares Pet Care ETF (PAWZ). The high level theme is very easy to understand, all the more so if you have pets, people are willing to spend a lot of money caring for and feeding their dogs, cats and whatever else they might own. We've always had a lot of dogs and we spend a lot of money on them so I can relate. The sector exposure shows a lot of healthcare and consumer oriented stocks which means PAWZ is unlikely to fundamentally sensitive to an economic downturn. That doesn't mean the shares won't drop in a bear market but regardless of what is going on in the world, it is unlikely that people will stop providing proper care and feeding of their dog if headline GDP contracts.

Narrowly specialized ETFs like this are often met with skepticism which I don't really understand. Petmed Express (PETS) is one of the fund's holdings. Over the last five years it is up 94% versus 56% for the S&P 500 despite falling by about 1/3 this year and it yields 3.8%. I have no idea whether it should be bought but it is down, does have some yield and a below market multiple (all information per Yahoo Finance). That might be enough of a catalyst to want to learn about the stock. If an investor is comfortable enough to buy the theme with an individual stock then why wouldn't they consider the possibility that an ETF could be a better way to access the theme. This seems relevant for any valid niche theme, if there are stocks that can do well, then so too could an ETF also do well.

A new internet ETF launched, the TigerShares China-US Internet Titans ETF (TTTN). The fund appears to own all the usual mega cap and very large cap suspects, social media companies, FANG stocks, all the most popular Chinese internet stocks and quite a few more specialized companies. It appears to have just about all of the largest holdings from the tech and communications services sectors which means owning something like SPDR Communications Services Sector ETF (XLC) and TTTN would be owning two of the same thing, almost. Yes the Chinese exposure is a difference but I would expect the correlation to be high, do you really need two funds that each have a lot of exposure to Facebook (FB)? Not that you shouldn't own TTTN, it could be a better mousetrap but I am saying not to own both.

Finally, the Amplify Black Swan Growth & Treasury Core ETF (SWAN) is up an running. I wrote about this fund when it first filed back in June. From the fund's page, it "seeks uncapped exposure to the S&P 500, while buffering against the possibility of significant losses." It does that by having 10% in call options on the SPDR S&P 500 ETF (SPY) and the other 90% in treasuries. This is a form of leverage where the 10% targets capturing 70% of the S&P 500's upside over the course of the entire market cycle plus the yield pick up from the treasuries. There are mutual funds that do this and the strategy at a high level is valid.

The treasury holdings are a mix of maturities that blend together to work out to a ten year duration including 22% of the fund in 30 year paper so the fund stands to be be sensitive to rising interest rates.

SWAN rebalances and reconstitutes every June and December.

In the course of six months the options could drop considerably and then the fund would rebalance into a 10% weighting again. If the normal duration for a bear market is 18-30 months then this could repeat several times resulting in a large decline. That doesn't make it a bad fund but I don't see how it necessarily buffers against significant losses. I would expect a black Swan fund to use a strategy involving put options not provide a levered long play on the S&P 500.