There are a couple of really good exchange-traded funds (ETFs) that I’d like to buy in May 2021.
Betashares Global Quality Leaders ETF (ASX: QLTY)
I think over the next few years, it’ll be the higher quality businesses that will perform the best.
Interest rates are expected to go higher, which could be painful for asset plays, high risk companies and indebted businesses. But high quality businesses could continue to do well, as they’ve nearly always done.
To be regarded as a high quality business, they have to rank well on return on equity (ROE), debt to capital, cash flow generation ability and earnings stability. When you combine those factors, it’s a really strong list that remains.
The QLTY ETF portfolio is made up of around 150 names. The biggest position weightings are only around 2% of the portfolio, so it’s nicely diversified. Some of the biggest holdings include: Facebook, Alphabet, Nvidia, Accenture, Adobe, SAP, UnitedHealth, Keyence, Cisco Systems and Intuit.
IT and healthcare make up around 60% of the portfolio, with communication services and industrials being the other two sectors with allocations of more than 10%.
The ETF’s costs are pretty reasonable at 0.35% per annum for the global diversification it gives where just under 40% of the portfolio is not based in the US.
Betashares Global Quality Leaders ETF’s net returns since inception in November 2018 has been 18% per annum. I think it can continue to do well over the coming years.
Betashares Climate Change Innovation ETF (ASX: ERTH)
This ETF is about getting exposure to a diversified portfolio of global companies leading the fight against climate change.
Its portfolio can own up to 100 global companies that earn at least half of the revenue from products and services that are looking to address climate change and other environmental problems. Those businesses are looking to reduce or avoid CO2 emissions.
The types of things that the businesses are trying to solve include clean energy providers, green transportation, waste management, sustainable product development, water efficiency, pollution control and improved energy efficiency and storage.
You may have heard of some of the biggest ten positions: Trane Technologies, Cie De Saint-Gobain, Infineon Technologies, Docusign, Tesla, Zoom Video Communications, Vestas Wind Systems, Nio, East Japan Railway and Delta Electronics. Those ten positions amount to 39.2% of the portfolio.
The sector allocation is interesting. Looking at the sectors with weightings of more than 5%: building products (15.1%), automobile manufacturers (12.9%), semiconductors (9.1%), application software (8.3%), heavy electrical equipment (8.1%), electrical components and equipment (7.5%), semiconductor equipment (6.9%) and renewable electricity (5.2%).
The ETF is brand new. But, the index that it tracks has done very well over the last three years – an average of 35.5% per annum which includes the management costs of 0.65% each year.
