ETFs For Increasing Military Spending

As we approach the one-year anniversary of the start of the Russian-Ukraine war, we are seeing more evidence that a significant boom is continuing in the defense industry.

I know what you may be thinking... the rally in defense stocks has already occurred, and the time to buy these stocks was at the start of the war in Ukraine.

While that would have been the ideal time to buy defense stocks, just because you didn’t buy back then doesn’t mean now is also not a good time to buy.

Let me explain why now is an excellent time to buy defense stocks, or better yet, Exchange Traded Funds that focus on defense stocks, and then I will give you a few different defense ETFs that you can buy today.

The Foundation for Defense of Democracies Center on Military and Political Power recently estimated that the total spending required by United States NATO allies could be as high as $21.7 billion to replace military equipment given to Ukraine to fight the war with Russia.

That number could be higher or lower based on how different countries decide to replace arms that were given to Ukraine, but the point is if NATO member countries want to build their own militaries back up to meet the level they were before the Russian-Ukraine war began, a lot of money will need to be spent, to get them back to par.

Furthermore, based on the situation in Ukraine, many believe that we will not only see countries replenish their weapons stockpiles but increase what they have in reserve.

Additionally, we are seeing more countries apply for acceptance into NATO since the Russian invasion of Ukraine. As we see NATO increase in size, it is likely that the alliance will also increase its own arms stockpile.

Ideally, the Russian-Ukraine war will end soon, and this conflict will be a short-term catalyst for defense spending.

But even if you are on the fence about the defense industry in the short term, the long-term prospects of the industry still look good. Continue reading "ETFs For Increasing Military Spending"

Invest In Women With This New ETF

A new Exchange Traded Fund is taking the next step with gender diversity investing. The Hypatia Women CEO ETF (WCEO) is the first ETF to focus strictly on women-run companies.

The only two requirements for a company be owned in WCEO are that it has a market cap of at least $500 million and a woman runs the company, either from the CEO or Chairperson position.

WCEO will have at least 80% of its assets in US companies that female Chief Executive Officers lead. Furthermore, the fund may invest up to 20% of holdings in US companies with an Executive Chairperson or a Chairperson who is female.

WCEO is a one-of-a-kind ETF, but it does have some competition if an investor is looking for a woman-focused ETF.

The Impact Shares YWCA Women’s Empowerment ETF (WOMN) tracks an index of large and mid-cap US equities selected and weighted to maximize exposure to firms that score highly on gender diversity.

WCEO has an expense ratio of 0.85% and just began trading in January. WOMN has an expense ratio of 0.75%, has been trading for about four years, and has over 200 holdings. Year-to-date, the fund is up 4.7%, down 12.41% over the last year, but up 11.83% annualized over the previous three years.

Another ETF focusing on women in the workforce is the SPDR MSCI USA Gender Diversity ETF (SHE). SHE tracks a market cap-weighted index of large and mid-size US companies that promote gender diversity through a relatively high proportion of women throughout all levels of their organization.

SHE has been trading for about seven years and has an expense ratio of 0.20%, the best out of this group. Year-to-date SHE is up 3.88%, down 14.48%, but up 2.53% annualized over the last three years and 4.82% annualized over the previous five years.

While each of these three ETFs promotes the idea of gender diversity in the workplace, WCEO has taken it to the next level, and I believe the requirement for a company to be run by a woman will set this ETF apart from the rest over the next few years. Continue reading "Invest In Women With This New ETF"

Worst Performing ETFs in 2022

Like the best-performing Exchange Traded Funds of 2022, the worst-performing ETFs of the year were all leveraged.

It is no surprise that leveraged ETFs would be the best and worst-performing ETFs each year. But, interestingly, three of the top first worst performing ETFs were leveraged funds that are bullish big technology stocks, and the other two were ETFs that are short oil & gas companies.

2022 was a year we saw many divergences occur compared to the past almost ten years.

The technology-heavy index, the NASDAQ, was the worst-performing major index, while the slow and sleepy Dow Jones Industrial Average, while still down, was the best performer. The Dow Jones Industrial Average fell 8.8% as the S&P 500 dropped 19.4%, and the NASDAQ sank 33.1%.

Let's look at which ETFs finished in the top five worst performers of 2022.

The worst performing Exchange Traded Fund of 2022 was the ProShares UltraShort Bloomberg Natural Gas ETF (KOLD) which ended the year down 88.62%. KOLD provides two times short exposure to an index that tracks natural gas by holding second-month futures contracts.

In 2022 the price of natural gas went through the roof as Russia invaded Ukraine. That invasion led to almost all of Europe imposing a ban on Russian oil and gas, which led to price increases for any other country that also banned the importation of Russian oil and gas.

While KOLD was the worst-performing ETF, the ProShares UltraShort Oil & Gas ETF (DUG) was the fourth worst ETF of 2022 after dropping 72.99%. DUG offers investors two times short exposure to a market-cap-weighted index of large US oil and gas companies.

Since Russia is one of the largest oil and gas producers in the world, the bans on buying their products sent the price of both oil and gas higher in 2022. Thus oil and gas companies based in the United States benefited, and DUG rose substantially.

But, most experts claim the Russian-Ukranie conflict was not the only reason we saw oil and gas prices climb. Some of the increase was likely due to increased demand as most of the world came out of Covid-19 restrictions, and more people felt comfortable traveling. Continue reading "Worst Performing ETFs in 2022"

Best Performing ETFs in 2022

2022 was a very tough year for investors, both big and small. All three of the major indexes ended the year down substantially. The Dow Jones Industrial Average fell the least, just 8.8%. The S&P 500 dropped 19.4%, while the technology-heavy NASDAQ sank 33.1%.

2022 was the first year in four that the major industries ended the year lower. Inflation and aggressive interest rate hikes by the Federal Reserve to combat persistent inflation weighed on the market as a whole but had a more damaging effect on technology stocks.

Out of the top-performing Exchange Traded Funds in 2022, two of the top five were ETFs that are short technology stocks, while two others were short Treasury Bonds.

It's not very often that the best performing Exchange Traded Funds are ones that had bet against an asset class or specific industries, but that was the type of year we had in 2022.

Let's look at the top five performing ETFs of the year and see what they had in common and if there is anything we can learn that will make us better investors in 2023 and beyond.

As mentioned, two of the top five best-performing ETFs were short, US Treasury bonds.

The best-performing ETF of 2022 was ProShares UltraPro Short 20+ Year Treasury (TTT) which rose 150.17%.

The third best-performing ETF was the ProShares UltraShort 20+ Year Treasury ETF (TBT), which increased by 93.29%.

Both funds were "short" or betting that they would decline in value, Treasury bonds that have 20 or more years until maturity.

The TTT was leveraged three times short Treasury bills. That means if a Treasury bill fell $1 and the TTT triple short leveraged fund had bet against it, TTT would be up $3. So for every $1 move lower Treasury bonds went, TTT was moving $3 higher.

The TBT fund was also short-leveraged, but it was only short two times. So if it were short a bond that fell $1, it would go higher by $2, not $3 like TTT. This also means that TBT carried lower risk than TTT, and still performed well in 2022. Continue reading "Best Performing ETFs in 2022"

How Low Can Tesla Go?

2022 Year-to-date shares of Tesla (TSLA) are down 66%. The question everyone is wondering is, "Can Tesla fall more?" The simple answer is yes. Any stock, even one with a cult-like following, can go to zero.

The question we should be asking is, when is Tesla stock fairly valued? Or even better, undervalued? Having an idea of what price Tesla should be valued at will give investors a better idea of when they should buy or sell. And really, the only time you buy or sell should be when a stock is overvalued or undervalued.

The problem is that valuing a stock is not cut and dry. Nearly every investor will inevitably come up with a different value for a stock, even if they are using the same data to do their valuations.

With that in mind, let us look at one way of valuing Tesla and determine if it is over, under, or fairly valued.

Today we will be using a comparison method of valuing Tesla. We will look at what Tesla does, compare its business to other companies operating in the same industry or industries, and determine if Tesla is appropriately valued based on its competitors.

Tesla is more than just a car company. I know you have all heard that before. Tesla considers itself a car company and an energy generation and storage company. So let us first compare Tesla to other solar energy generation and storage companies, and then we will tackle the car company side of the business.

A few years ago, Tesla purchased Solar City. A solar panel company that installs solar panels on residential and commercial buildings and has add-on battery storage components.

We can compare this side of Tesla's business to First Solar (FSLR). First Solar makes, installs, and maintains solar panels just like Solar City does for Tesla. First Solar is valued at just under $16 billion and has a price-to-earnings ratio of 165.

However, Tesla and Solar City also sell backup batteries that can be installed in a home. These batteries would be used during power outages or when solar panels aren't generating power, such as at night.

A comparison company for this would be Generac Holding (GNRC), which also sells power backup products, mainly generators, but they have battery backup systems for solar panels. Generac currently trades for $6.5 billion and trades at a P/E of 15, much more reasonable than First Solar. Continue reading "How Low Can Tesla Go?"