If you’re wondering where to invest next, look no further: some of the world’s top investors have been sharing their best ideas with Bloomberg.
Idea 1: Commercial real estate
This idea comes from Bailard Wealth Management, which reckons investors are overlooking commercial real estate because of negative headlines.
Sure, people might not be going back to offices in a hurry, but the asset class is more diverse than just offices: commercial real estate includes office space, apartments, and industrial real estate. It’s less volatile than stocks too. In fact, real estate tends to do well when stocks are falling, partly thanks to their attractive yields: a key index of private real estate funds generates a 4% yield annually.
Which ETFs are a good place to start?
As an equal-weighted index, the Invesco S&P 500 Equal Weight Real Estate ETF (EWRE) has outperformed size-weighted real estate indexes, and that might make it worth its expense ratio of 0.40%.
Idea 2: Large-cap ESG
This idea comes from RegentAtlantic, which advocates buying stocks along two themes: large caps and ESG winners. Between climate change and social justice movements, companies that are on the front foot are garnering more and more investor attention.
RegentAtlantic is particularly keen on cyclical stocks that score well on ESG metrics, given they’ve been showing some of the highest earnings growth coming out of the pandemic.
Which ETFs are a good place to start?
The iShares ESG Aware MSCI USA ETF (ESGU) is the biggest socially responsible ETF with an expense ratio of 0.15%, but it may not suit you if you’re an ESG purist: it includes oil stocks like Exxon. The iShares MSCI KLD 400 Social ETF (DSI) does cut out most of those sorts of companies, but it also comes with a slightly higher expense ratio of 0.25%.
On the cyclical side, the iShares U.S. Basic Materials ETF (IYM) offers more direct exposure to the highly cyclical basic materials industry but lacks an ESG focus.
Idea 3: Healthcare services
Now this idea – which came from Chilton Trust – is trying to capitalize on a trend sparked by the pandemic. The firm recommends investing in healthcare services companies that are focused on delivering convenience, and healthcare service insurance companies.
There are two companies in particular that Chilton’s interested in: UnitedHealth Group and CVS. UnitedHealth, it reckons, has a strong track record of execution and shareholder returns. And since almost half its business is tied to healthcare information technology (the rest is in healthcare insurance), it has an advantage over rivals thanks to its data. CVS, meanwhile, has potential upside following its merger with Aetna. Combined, the companies’ digital know-how could give it an advantage in areas like telehealth, mental health, and skincare.
Which ETFs are a good place to start?
The iShares U.S. Healthcare Providers ETF (IHF) – which tracks companies engaged in healthcare facilities and insurance and has an expense ratio of 0.43% – is one way to play this trend. It’s relatively concentrated, mind you, with 22% of its portfolio in UnitedHealth.
Idea 4: Clean energy
This idea comes from a private investor with a focus on climate change, who suggests betting on the electrical grid. He reckons the solution to the climate crisis is about combining battery, solar, and wind power with a restructured energy grid to get power from where it’s generated to where it needs to be.
The sector that’ll be needed to rebuild the US energy grid is going underappreciated right now: companies like MYR Group, MasTec, and Quanta Services aren’t exactly household names. But most of the interesting battery and solar companies are Chinese-listed, which makes it more difficult for US investors to access them. That’s where ETFs come in…
Which ETFs are a good place to start?
The Global X Lithium & Battery Tech ETF (LIT) and VanEck Vectors Rare Earth/Strategic Metals ETF (REMX) both offer exposure to clean energy, with expense ratios of 0.75% and 0.6% respectively. Of course, they – like most Chinese companies at the moment – come with the risk that the government will throw a spanner in the works. Alternatively, the First Trust NASDAQ Clean Edge Smart Grid Infrastructure Index (GRID) is a theme-based ETF focused on making energy grids smart and clean. Its expense ratio is 0.70%.
