September 2021 Qraft ETF Rebalancing Key Takeaways
The Delta-variant seems to have reached its peak, with many firms such as Morgan Stanley[1] predicting that the Delta variant has peaked. However, even if the complete end of COVID seems far away with continuing mutations being reported, and according to McKinsey[2] the public seems to be tired of COVID restrictions. Many are vaccinated and are willing to take a chance as they move towards a bit of normalcy. Worries of the recovery ending last month seem to be unfounded as strong consumer demand continues in many areas. How have these changes been reflected in our September rebalance? Our monthly rebalancing approach allows us to respond to these unexpected changes in economic forecasts. Check out how our AI have factored in these changes in its holdings.
Qraft AI-Enhanced U.S. Large Cap Momentum ETF (NYSE: AMOM)
Key Takeaways
Is AI taking a step into the metaverse*?
Jensen Huang NVDIA CEO: “Omniverse or the Metaverse is going to be a new economy this is larger than our current economy.”
NVDA Omniverse platform referred to as the “metaverse for engineers”
Planned acquisition of ARM[3]
FB is diversifying reduce risk exposure with focus on the metaverse
Entering the metaverse space with the recent release of ‘Facebook Workrooms’[4]
* Metaverse: Refers to a collective virtual shared space augmented by technology such as the internet
Time to buy Amazon stocks again?
AMOM removed AMZN last month before it missed Q2 earnings expectations
Now the top holding, which shows responsiveness of active strategy
Addition of WMT emphasizes retail boom in the US
WMT launches GoLocal, a last-mile delivery service for other retailers
Leverages its expansive infrastructural/logistical network
AI turns back on pandemic trades?
Removal of pandemic stocks – ZM, ROKU
Qraft AI-Enhanced U.S. Next Value ETF (NYSE: NVQ)
Key Takeaways
Delta variant seems to peak, and reopening to continue
NVQ consumer discretionary holdings increase from 1.97 to 5.15%
However, some believe that the end of the monetary policy announced by the Fed will decrease consumer discretionary spending[5]
Public sentiment is turning as the Delta variant is thought to have peaked
Many are tired of restrictions that have been going on in some countries for more than 2 years and want to remove economic restrictions
In line with this we can see a decrease in consumer staples
Consumers may be upgrading certain staples with better products in the discretionary sector
AI profit-taking in the energy sector
Removal of holdings of ConocoPhillips and Marathon Petroleum Corporation
Qraft AI-Enhanced U.S. Large Cap ETF (NYSE: QRFT)
Key Takeaways
Bullish on healthcare?
QRFT increases stake in healthcare sector by more than 4%
BAX in talks of $10 billion acquisition of Hill-Rom[6]
BSX completed $1.1 billion acquisition of Lumenis[7]
REGN’s new Dupixent treatment for atopic dermatitis generating $2.8 billion in the first half of 2021 alone[8]
Healthcare stocks make up the 4 out of the top 10 holdings
VRTX new promising treatment for cystic fibrosis gains approval in Canada[9]
LLY purchases Dupixent rival for $1.1 billion[10].
Value: Aims to capture excess returns from stocks that have low prices relative to their fundamental value. This is commonly tracked by price to book, price to earnings, dividends, and free cash flow.
Size: Historically, portfolios consisting of small-cap stocks exhibit greater returns than portfolios with just large-cap stocks. Investors can capture size by looking at the market capitalization of a stock.
Momentum: Stocks that have outperformed in the past tend to exhibit strong returns going forward. A momentum strategy is grounded in relative returns from three months to a one-year time frame.
Quality: Defined by low debt, stable earnings, consistent asset growth, and strong corporate governance. Investors can identify quality stocks by using common financial metrics like a return to equity, debt to equity and earnings variability.
Volatility: Empirical research suggests that stocks with low volatility earn greater risk-adjusted returns than highly volatile assets. Measuring standard deviation from a one- to three-year time frame is a common method of capturing beta.
[1] Durden, Tyler. “It Finally PEAKED: The Delta of DELTA Turns Negative.” ZeroHedge, www.zerohedge.com/covid-19/it-finally-peaked-delta-delta-turns-negative.
[2] “US Consumer Sentiment and Behaviors during the Coronavirus Crisis.” McKinsey & Company, McKinsey & Company, 19 Aug. 2021, www.mckinsey.com/business-functions/marketing-and-sales/our-insights/survey-us-consumer-sentiment-during-the-coronavirus-crisis.
[3] Abhinav Davuluri, CFA. “Morningstar, Inc.” Morningstar, www.morningstar.com/stocks/xnas/nvda/quote.
[4] Heath, Alex. “Inside Facebook's METAVERSE for Work.” The Verge, The Verge, 19 Aug. 2021, www.theverge.com/2021/8/19/22629942/facebook-workrooms-horizon-oculus-vr.
[5] Brzeski, Carsten. “Back from the Beach, into the Breach.” ING Think, ING Think, 2 Sept. 2021, www.think.ing.com/articles/back-from-the-beach-and-into-the-breach/.
[6] Lombardo, Cara, and Dana Cimilluca. “WSJ News Exclusive | Baxter Is in Advanced Talks to Buy Hill-Rom for about $10 Billion.” The Wall Street Journal, Dow Jones & Company, 29 Aug. 2021, www.wsj.com/articles/baxter-is-in-advanced-talks-to-buy-hill-rom-for-about-10-billion-11630274775.
[7] Chesto, Jon. “Boston Scientific COMPLETES $1B Acquisition of Israeli Firm - The Boston Globe.” BostonGlobe.com, The Boston Globe, 1 Sept. 2021, www.bostonglobe.com/2021/09/01/business/boston-scientific-completes-1b-acquisition-israeli-firm/.
[8] “Regeneron Reports Second Quarter 2021 Financial and Operating Results.” Regeneron Pharmaceuticals Inc., www.newsroom.regeneron.com/news-releases/news-release-details/regeneron-reports-second-quarter-2021-financial-and-operating.
[9] Vertex Pharma Gets Approval for Cystic Fibrosis Drug for Infants in Canada.” MarketWatch, MarketWatch, 25 Aug. 2021, www.marketwatch.com/story/vertex-pharma-gets-approval-for-cystic-fibrosis-drug-for-infants-in-canada-271629921756.
[10] Taylor, Nick Paul. “Lilly, Swinging at the King, Shows Dupixent Rival Works in Phase 3, but Wait for Key Figures Goes On.” FierceBiotech, 16 Aug. 2021, www.fiercebiotech.com/biotech/lilly-swinging-at-king-shows-dupixent-rival-works-phase-3-but-wait-for-key-figures-goes.