XT: Still One Of My Top Ways To Take Equity Risk Going Forward

seekingalpha06-09

The iShares Exponential Technologies ETF is a great way for conservative investors to add higher-octane equity exposure to their portfolios.XT has exhibited relatively low downside risk compared to ...

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Thomas BarwickHow does a devoutly conservative investor go about identifying ways to take bigger risks with part of their portfolio?","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"COIN":"Coinbase Global, Inc.","LU0175139822.USD":"AB FCP I Global Equity Blend A USD","IE00BWXC8680.SGD":"PINEBRIDGE US LARGE CAP RESEARCH ENHANCED \"A5\" (SGD) ACC","BK4527":"明星科技股","FDN":"First Trust Dow Jones Internet I","LU0097036916.USD":"贝莱德美国增长A2 USD","BK4579":"人工智能","BK4588":"碎股","LU0320765059.SGD":"FTIF - Franklin US Opportunities A Acc SGD","BK4141":"半导体产品","IE00B3M56506.USD":"NEUBERGER BERMAN EMERGING MARKETS EQUITY \"A\" (USD) ACC","BK4503":"景林资产持仓","LU0198837287.USD":"UBS (LUX) EQUITY SICAV - USA GROWTH \"P\" (USD) ACC","IE00BD6J9T35.USD":"NEUBERGER BERMAN NEXT GENERATION MOBILITY \"A\" (USD) ACC","BK4551":"寇图资本持仓","LU0289961442.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"AX\" (SGD) ACC","LU1861558580.USD":"日兴方舟颠覆性创新基金B","ARKK":"ARK Innovation ETF","BK4581":"高盛持仓","LU0127658192.USD":"EASTSPRING INVESTMENTS GLOBAL TECHNOLOGY \"A\" (USD) ACC","MU":"美光科技","LU0289739343.SGD":"SUSTAINABLE GLOBAL THEMATIC PORTFOLIO \"A\" (SGD) ACC","LU1316542783.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD","LU0889566641.SGD":"FTSF - Templeton Shariah Global Equity A Acc SGD","IE00BFSS7M15.SGD":"Janus Henderson Balanced A Acc SGD-H","BK4529":"IDC概念","LU0234570918.USD":"高盛全球核心股票组合Acc Close","LU0238689110.USD":"贝莱德环球动力股票基金","LU1861559042.SGD":"日兴方舟颠覆性创新基金B SGD","LU0170899867.USD":"EASTSPRING INVESTMENTS WORLD VALUE EQUITY  \"A\" (USD) ACC","IE00B19Z3581.USD":"Legg Mason ClearBridge - Value A Acc USD","EQR":"资产住宅公司","LU0642271901.SGD":"Janus Henderson Horizon Global Technology Leaders A2 SGD-H","LU0072462426.USD":"贝莱德全球配置 A2","BK4592":"伊斯兰概念","IE00BDCRKT87.USD":"PINEBRIDGE GLOBAL DYNAMIC ASSET ALLOCATION \"ADC\" (USD) INC","FORD":"福沃德工业","BK4215":"住宅房地产投资信托","LU0080751232.USD":"富达环球多元动力基金A","LU0056508442.USD":"贝莱德世界科技基金A2","BK4585":"ETF&股票定投概念","IE00BJJMRY28.SGD":"Janus Henderson Balanced A Inc SGD","IE00BMPRXN33.USD":"NEUBERGER BERMAN 5G CONNECTIVITY \"A\" (USD) ACC","XT":"iShares Exponential Technologies ETF","BK4595":"比特币概念","LU0109392836.USD":"富兰克林科技股A","BK4566":"资本集团","BK4575":"芯片概念","BK4587":"ChatGPT概念","NVDA":"英伟达"},"translate_title":"XT：仍然是我未来承担股票风险的最佳方式之一","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"XT":1,"NVDA":1,"MU":1,"ARKK":1,"FORD":1,"EQR":1,"COIN":1,"FDN":0.9},"content_text":"The iShares Exponential Technologies ETF is a great way for conservative investors to add higher-octane equity exposure to their portfolios.XT has exhibited relatively low downside risk compared to other risk-seeking investments and offers diversification with over 200 holdings.The ETF focuses on technology stocks, which have shown significant growth potential over the past five years.   Thomas BarwickHow does a devoutly conservative investor go about identifying ways to take bigger risks with part of their portfolio? That's the question I've asked myself over the past 30 years. I'm the son of a guy who grew up during the Great Depression, and that experience governed his approach as a self-directed investor during the last 1/3 of his life. And, while I'm up for making as much money as I can, whenever and wherever I can. An \"all-weather\" investment approach. But as nice as T-bills and tactically managing my 40-stock dividend portfolio, surrounded by \"tail risk\" put options all combine to put a clamp on my downside risk in virtually any market scenario, investing is not just about protecting. It is about growing. And for some, speculating. I'll leave the speculation to others, and focus here on one of a small number of ETFs I use at different times and at varying portfolio weightings to follow through on my investment \"wild side.\" The iShares Exponential Technologies ETF (NASDAQ:XT) is one that I have written on in the past. In fact, since my initial analysis of it on 11/29/2022, more than 18 months ago, I have written on it 4 times. This is the 5th. And far from \"taking the 5th\" on XT, I am reiterating why I see it as a great way for a conservative investor like me to sprinkle some higher-octane equity exposure into my portfolio in a diversified, transparent manner. I currently own a small position in XT in my all-ETF portfolio, which is the main \"partner\" portfolio to my YARP hedged dividend stock portfolio I have been writing about here recently. And, while that all-ETF portfolio (actually, it does have a small put option position because that's just how I roll) is smothered in T-bill ETFs and a mix of long and inverse positions, XT is the \"wildcard\" I often use. Here's why. XT: takes some risk out of taking a risk XT has exhibited relatively low downside risk compared to other places I have dabbled in for the \"risk-seeking\" portion of my portfolio. XT has a heavy focus on technology (59% of the ETF currently, with healthcare the only sector that accounts for more than 6% of assets). However, as the top holdings show, this ETF owns a wide variety of tech stocks, and is highly diversified, with more than 200 holdings. Normally, I prefer more concentrated ETFs. But this is a risk-seeking area for me, and so my natural conservative nature kicks in and finds a \"happy medium\" in XT. I get to own a piece of Nvidia (NVDA), Coinbase (COIN) Micron (MU) and several other market leaders, but do so in smaller bites. That also means that I'm willing to lift my allocation to XT at times to a much higher portfolio allocation, since it is taking the risk out of taking a risk by having most stocks occupy less than 1% of the fund. Seeking AlphaFrom software, to manufacturing and consumer applications, to the headline-dominating theme of artificial intelligence, technology has completely shifted the business world and the financial markets. This probably isn’t breaking news to anyone, but it is here to stay. And while taking risk does not equate exactly to investing in tech stocks, it is highly correlated, if you will. I have made the case that tech should be its own equity asset class, since over the past 5 years, we've seen this (below). That's a triple in the tech sector, a double in the overall stock market, and \"only\" a 69% advance in the S&P 500 ex-technology. Tech and the rest of the market are on different planets over the past half decade. Data by YChartsXT has lagged all 3 of those the past 5 years, at a 63% cumulative return. So why do I bother with it? Because as I will continue to pound the table on... ...past performance guarantees us nothing other than maybe feeling overconfident when we buy something! \"AI\" stocks are carrying the market right now, and that's great for the big holders. But I've seen this movie before, and it was called \"dot-com bubble.\" And so I think investors have 2 choices about risk-taking in the aftermath of what we see charted above: tread cautiously and tactically around market areas that may be obscenely overvalued, or just hope that past is prologue. I'm taking the former route, and that's why XT is part of my smallish basket of ETFs that I consider my \"go-to\" set for when I want to at least temporarily raise my tech allocation. XT holds dozens of stocks that have been beneficiaries of the AI boom. ChatGPT itself has garnered the attention of businesses, investors, and students across the world. The scary part is that most of us truly have no idea of the extreme power behind it. What investors need to understand is the true growth potential within this sector...but also the risk it gets ahead of itself, where the stocks are bought with no regard to valuation, or at levels that pressure companies to deliver unreasonable levels of revenue and profits. Remember the dot-com bubble? I do, and it impacts my investment process, 25 years later. One of my memories of the dot-com era was the CEO of Sun Microsystems telling a group of analysts that in order for his company's stock to justify its price at the time, he'd have to run the company with no expenses for 10 years. Obviously, that is impossible, But 10x sales is what that essentially means. So while I like XT for its composition that includes leaders and relative newcomers within industries like semiconductors, cybersecurity, cloud-based software and much more, I think in smaller quantities than, for instance, a buy and hold of a Nasdaq 100 ETF, which owns some of the same stocks, but in allocations several times what XT is structured to allow. Again, this is where equal weighting is fine with me, since I am both long-term optimistic but short-term cautious on the \"innovation\" space XT patrols. For those less familiar with the underlying business trends that make innovative stocks so buzzworthy these days, here's a quick summary. Cloud-based technology and software can hold and organize infinite amounts of data, making it much more accessible and convenient. Computer chips and their memory capability affect and benefit millions, if not billions of people every day. And with access to everything online, cybersecurity is no longer optional, but essential for governments, businesses and consumers alike. The exciting part about XT is that several of those next up-and-coming tech stocks are amongst the holdings, and it will only be a matter of time until we see another Nvidia with the next innovative brand. In the same way that a few stocks ran up the capitalization rankings in the small-cap indexes in recent years, and were then promoted into the S&P 500, so too does that possibility exist within many of the 225 holdings in XT. XT: sells at a 30% discount to ARKK and QQQ on trailing price to sales I mentioned price to sales earlier, and with XT at 3.4x trailing in that regard, that's not super-cheap. Unless, that is, you compare it to the popular QQQ or ARK Innovation ETF (ARKK), which are both selling at around 5x trailing sales. So XT is at a 30% discount to those.   Ycharts.comI am bullish on XT in the long run, but I suspect it will take a better environment for equal-weighted investing to make it really noticeable. I mentioned that this is my 5th article on XT over the past 18 months or so. That's half of all analyst articles on this ETF over that time. Despite being an iShares product with $3.4 billion in assets, it is still quite \"under covered\" and I assume relatively unknown to the Seeking Alpha audience. So I'm happy to be one tracking it for the \"herd\" here. Data by YChartsThe headwind against equal-weighted ETFs is one risk to XT, and another is a recession and its impact on sentiment toward tech. But we've seen a \"dress rehearsal\" for that, and XT held in quite well. See that chart above, which covers the full year 2022. XT's relative return versus a couple of \"risk-taking alternatives\" I consider, ARKK and Bitcoin (showing spot price, not an ETF) speaks volumes to me. That's equal weighting and a more disciplined stock selection process from iShares index team, versus ARK's often headline-grabbing but historically ineffective and very high-risk approach. Below, here's another look at historical risk. I want to make as much as I can when taking risk, but the swings in some of the XT alternatives shown here are more than I care to offer at. That Bitcoin-like volatility is something I'd sooner pursue through call options, where I can define my maximum loss on the buy side. Data by YChartsMy technical view on XT is pretty simple. Weekly price uptrend in place. Nothing earth-shattering, but a strong hold at this point. TC2000 (SungardenInvestment.com - Rob Isbitts) XT still makes my limited basket of ETFs that I keep as a watchlist, with the objective of owning them tactically. That means my position size will fluctuate as I measure the risk of each ETF, and I will own an ETF for weeks or months, even though my preference is to own them for at least a year, and hopefully many years. But this is not a market environment when I can just put aside what I see in my charts, quantitative analysis and most of all, my vivid memories of tech stocks during the dot-com bubble era.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2442856785"}