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Category: Technology

New Name, Same Old Gains for the ERShares ENTR ETF

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The ERShares Entrepreneurs ETF (ENTR) has a new name, but it’s still backed by the same compelling strategy.

ENTR tries to reflect the performance of the Entrepreneur 30 Index, which is comprised of 30 U.S. companies with the highest market capitalizations and composite scores based on six criteria referred to as entrepreneurial standards. ENTR primarily invests in US Large Cap companies that meet the thresholds embedded in their proprietary Entrepreneur Factor (EF).

ERShares’ EF “incorporates a bottom-up investment orientation, powered by artificial intelligence (AI), that stands above other investment factors such as: momentum, sector, growth, value, leverage, market cap (size) and geographic orientation. Moreover, with the aid of AI and Thematic Research, ERShares incorporates a macro-economic, top-down approach that integrates changing investment flows, innovation entry points, sector growth and other characteristics into a dynamic, global perspective mode,” according to ETFdb.com.

ENTR 1 Year Performance

The Methodology behind ENTR’s Stellar Year

ENTR’s growth and value traits are relevant in the current market environment.

“Some growth businesses may be permanently accelerated by COVID, but for others, the 2020 bump was a temporary pull-forward of demand,” according to BlackRock research. “Meanwhile, cyclical value stocks, those with ties to economic growth and low valuations, have been most depressed and should enjoy a larger bounce with market and economic recoveries. A look back also shows that value historically has outperformed in the early stages of a recovery.”

The fund allocates nearly 61% of its combined weight to technology and healthcare names, another important trait.

“Notwithstanding our outlook for a value resurgence, we see good reason to stick with stocks with dominant and emerging business models that can continue to deliver for shareholders. Sectors like technology and healthcare contain many high-quality businesses with the ability to compound growth across time,” adds BlackRock.

Joel Shulman: “It’s a Buyer’s Market,” Especially in High-Growth Tech

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As inflation fears recede and investors shift back toward risk asset classes once more, opportunities are emerging in both growth and value stocks, said Joel Shulman, founder and CEO of ERShares, in a recent interview with Cheddar’s The Open.

In the interview, he offered his viewpoints on the prospect of rising inflation, the strong potential for tech stocks in the latter half of the year, and why investors should avoid Bitcoin.

“Inflation… has been the story all year”

So far, the worst of inflationary fears have not yet materialized in the market, said Shulman. “In terms of inflation, what we’re focusing on are wages which are still below July 2020 levels, (and) we’re seeing the most job vacancies ever,” he said.

He also pointed out that food prices, a significant indicator of real inflation, were only up 2.2% last month.

Shulman did caution that the Federal Reserve could potentially end up overextending itself with bonds.

Currently the Fed is committed to buying $120 billion worth of Treasury bonds and mortgage-backed securities per month, which is keeping interest rates artificially low. If the Fed were to reduce or cease its purchasing program, Shulman says, “we’re going to have some problems.”

“We think tech is well-positioned for the second half of the year”

Tech stock prices have been oscillating a lot lately, many having reached highs in February before dropping at the end of the month; only to follow the same pattern in March through May.

“We are optimistic going forward with tech, especially high growth tech because we think they’re good opportunities now,” Shulman said.

With value stocks falling off of recent highs, Shulman sees an opportunity for high-growth stocks, especially in tech.

He clarifies: “It’s a buyer’s market but it’s very hit-or-miss” when it comes to investing in value versus growth stocks.

Shulman disagrees that interest rate increases could dampen tech stock prices because they’d need to be discounted more. He argues that tech stocks already have a high discount rate built into them by analysts because they are priced over a long period of time, and moving basis points don’t do much to affect the tech stocks.

“It’s the growth of these tech stocks that really drives their valuation, and the growth is still there,” Shulman added.

Speaking specifically about the fintech sector, Shulman believes that Square Inc. (NYSE: SQ) stands out. Square was up around 20% in April, and while it got hit hard in May, it is rebounding strongly.

Square is “a great growth story for a number of years…and I think it’s a good opportunity to buy right now,” added Shulman.

Bitcoin: “Volatile and it has a lot of problems”

Shulman expressed concerns about Bitcoin as an investment, adding that investors should “stay away” across the board.

He believes that “digital gold” is not an accurate moniker for Bitcoin. Gold has been used as a default currency for thousands of years. “It’s not a store of value,” he says of Bitcoin.

Shulman goes on to explain that the lowest volatility for Bitcoin historically “has never been below the highest level for gold.”

What’s more, the environmental impact of cryptocurrency mining is extreme; Bitcoin “is not ESG friendly,” Shulman said.

The offer of miners to change their protocol to become more environmentally friendly is concerning because in changing the protocol, miners could also decide to make the supply of Bitcoin unlimited. It is currently capped at 21 million tokens. Creating an unlimited supply of any cryptocurrency “can basically destroy the value overnight,” said Shulman.

If miners are able to change the protocols in one area, such as ESG, they could also change the protocols in other areas as well.

The propensity for Bitcoin to be involved in illegal activities is yet another reason to stay far away from the digital assets. Because of the extortion surrounding the Colonial Pipeline, which was shut down by hackers, and the subsequent ransom payoff in $5 million in Bitcoin, “the FBI is now looking into bitcoin and how they can better regulate this.”

Shulman goes on to warn: “it’s not a question of if but when they’re going to regulate.”

Expect Short-Term Choppiness in May Markets, Says ERShares Founder

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Big tech stocks have notched big gains, but they still have room to move even higher throughout May and the rest of 2021, said Joel Shulman, founder and CIO of ERShares, in an interview with Fox Business.

Despite setbacks for some major companies, selected FAANGS are performing strongly thus far, said Shulman. “It’s unbelievable, these companies [Facebook (FB)Amazon (AMZN) and Google (GOOGL)] are $4.5 trillion and yet they’re still growing 40-50%.”

All three companies have pivoted to perform exceedingly well in the midst of the pandemic, he pointed out, with Amazon’s EBIT increasing by 36%: “we haven’t seen this type of company ever.”

While many companies outperformed expectations, Shulman believes that some value stocks or high fliers “may be in trouble,” as exemplified by Twitter (TWTR) last week and Pinterest (PINS).

Changes in the capital gains tax could also introduce some “choppiness” into the markets, he said.

Earnings Season Takeaways

First quarter reporting saw 95% of tech stocks beating earnings, noted Shulman, but their recent volatility has made it difficult for analysts to predict what to expect next.

Analysts are “having an extremely hard time” predicting the trajectory of even well-known companies like the FAANGS, where predictions were way off. Avis Car Rental (CAR) is a value stock that personifies this; it is currently at an all-time high after being close to bankruptcy a few months ago.

“Unfortunately, with earnings so far, the guidance hasn’t been very helpful,” he added.

Individual Investors Holding More Stock Than Ever

New reports indicate that individual investors are holding more stock than ever; in April alone, stock holdings comprised 41% of total financial assets for U.S. households.

Individual investors’ money will “help fuel the markets” and encourage growth, argued Shulman,

“We saw what happened last year,” he said, noting that individual investors opened up accounts with Robinhood, Schwab, and IBKR en masse. But “there’s still a lot of cash on the sidelines.”

Individual investors are putting their money into Coinbase and Bitcoin, as well as high growth stocks, which have taken a hit recently.

Consequences of the Higher Capital Gains Rate

When asked if he was worried about the Biden administration potentially gearing up to push higher taxes, Shulman acknowledged that corporations and entrepreneurs could encounter more issues.

“As we’ve seen in the past, when corporate rates go up, it encourages companies to go offshore,” he said.

That’s because increasing capital gains taxes encourages companies and entrepreneurs to find ways to cut taxes, either through avoidance or evasion.

Specifically speaking to the entrepreneurial sector, Shulman said that entrepreneurial growth could be inhibited, because as taxes increase, founders and CEOs are going to “scale back on some of their growth in the organization development” as well as “the R&D and the properly planning equipment expenditures they’ve been making.”

Overall, however, Shulman remains positive on the outlook for the rest of the year. “We think we’re going to end the year higher,” he concluded.

If You Like Tesla and Amazon, You’ll Love this ETF

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Would you like to know where you can find the next Trillion $ growth stock? If so, ERShares may have an answer for you. It is an ETF with NYSE Ticker: ENTR. This ETF invests in the leading Entrepreneurial publicly listed companies around the world. ERShares was among the first to introduce a thematic approach to investing, having started 15 years ago following research conducted at Harvard University. 

Our methodology is a proprietary trade secret, but the basic message is clear: ERShares selects the most entrepreneurial, strong growth, global companies and puts it to market in one easy-to-invest fund.  Many investment companies claim Disruptive Technology, but only ERShares ensures that the right technology is matched with the right leaders. They believe that without the best entrepreneurial minds, technology alone will not get very far. 

The ENTR ETF specializes in innovative HealthCare and Technology companies packed with All Star leaders including Elon Musk (Tesla), Jeff Bezos (Amazon), Reed Hastings (Square/Twitter), Jack Ma (Alibaba), Larry Page, Sergey Brin (Alphabet), Mark Zuckerberg (Facebook) and many others that are not yet as well-known but who will likely soon join that list. 

ENTR is currently one of the strongest performing ETFs in its investment class and has an annual cost of 49 cents for every $100 investment. Moreover, the Fund Managers do not settle on prior performance and are constantly seeking exciting new growth stories in HealthCare and Technology to add to their ETF. The Markets have been strong for most of 2020, though frequently experience periods of volatility.  Will this trend continue? Nobody really knows for sure or can offer promises about the future. However, ERShares team has confidence that whenever the next great growth story emerges, it will likely be led by a successful Entrepreneur, and probably reside within the ENTR ETF.