Kevin O’Leary is best known for his antics on Shark Tank, but to those on Wall Street, he is known for his more conservative approach to investing. O’Leary started his O’Shares ETF Investment firm back in 2015 and launched the firm's first fund the O’Shares FTSE U.S. Quality Dividend ETF (OUSA). A month after releasing that fund he rolled out two more, the O’Shares FTSE Europe Quality Dividend ETF (OEUR) and the O’Shares FTSE Asia Pacific Quality Dividend ETF (OASI).
His next two ETF’s came in 2016 and 2017 and if perhaps you could guess what phrase was in the name of both of those? Quality Dividend!
The O’Shares FTSE Russell Small Cap Quality Dividend ETF (OUSM) starting trading December 30th, 2016 while the O’Shares FTSE Russell International Quality Dividend ETF (ONTL) began trading on March 22nd, 2017.
The first five funds O’Leary has rolled out focused on companies with strong balance sheets, and that paid a nice dividend, what most investors would refer to as “conservative” investments. But, his newest ETF, the O’Shares Global Internet Giants ETF (OGIG), is a lot less about quality dividends and more about quality business and growth potential. So, O’Leary is still looking for quality businesses, but with more growth opportunity than dividend income like his past ETF’s.
The O’Shares Global Internet Giants ETF invests in global internet and internet technology-related companies based on growth and different quality factors that the fund managers have set. The company’s revenue growth rate defines company 'growth' while one metric used to determine a “quality” company is the monthly cash burn rate. Firms considered for the fund also must have at least 50% of their revenues come from internet technology or internet commerce. OGIG can pick from 2500 stocks based on the following breakdown; the 1000 largest US-listed companies, the 500 largest listed European companies, the 500 largest Asia Pacific companies, and the 500 largest emerging-market companies.
Currently OGIG has a position in just 53 stocks, with the top ten holdings as follows; Facebook (FB), Alphabet (GOOGL/GOOG), Amazon.com (AMZN), Alibaba (BABA), Tencent (TCEHY), Microsoft (MSFT), Netflix (NFLX), MercadoLibre (MELI), JD.com (JD), Snap (SNAP). The ETF’s top ten holdings also make up 44% of the funds $current $52 million in assets under management.
The fund also has a weighted average market cap of $230 billion and an average price to earnings ratio of 95. This means the fund invests in rather large companies which are currently trading at a very high premium. This could be cause for concern in the future if we see a big market correction because the higher priced stocks typically are hit the hardest when the market turns sour. But, that is not to say that OGIG will not perform well in the future considering that it's invested in quality growth companies which in many cases are both industry leaders and a proven track record.
OGIG has an expense ratio of 0.48%, which is not outlandish for a managed fund but also not what we would consider cheap and it also currently, unlike all of O’Leary’s other funds, does not pay a dividend yield.
Investors that are considering high growth stocks or a FANG focused ETF should give some consideration to O’Shares Global Internet Giants ETF (OGIG). O’Leary has a proven track record himself of picking good stocks and his conservative approach to investing means that while OGIG’s stocks are more growth focused, they still meet some of his conservative investing metrics. A strong balance sheet and overall financial health of a company are important to a “conservative” investor like O’Leary, and that’s likely what he is bringing to the table with OGIG that other high-growth ETF’s may not.
Disclosure: This contributor held positions in Facebook, Alphabet, Amazon.com, Microsoft, Netflix, MercadoLibre. at the time this blog post was published. This article is the opinion of the contributor themselves. The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. This contributor is not receiving compensation (other than from INO.com) for their opinion.