AdvisorShares recently launched two new actively managed funds to tap some of the worst-hit areas of the pandemic — one is
AdvisorShares Hotel ETF BEDZ and the other is AdvisorShares Restaurant ETF EATZ.
The duo falls in the leisure category, which has been badly hit by the pandemic-induced lockdowns and restriction. The recent rise in COVID-19 cases have also been posing a threat to the imminent success of the newbies.
Then again, new ETF launches on travel and leisure mean that market research has shown consumers’ keen desire to step out and explore. Hence, turning one’s face from the reopening trade amid renewed COVID-19 tensions could be a mistake, according to Mark Stoeckle, chief executive officer of Adams Funds,
as quoted on Bloomberg.
Against this scenario, let’s delve deeper into the new funds and the long-term potential of both the industries.
The fund BEDZ invests solely in the hotel industry and its related services, including hotels, resorts, cruise lines, and other travel-related services. VICI Properties (4.89%), Extended Stay America (4.73%) and Airbnb Inc-CLASS A (4.69%) are the top three holdings. The fund charges 79 bps in net fees.
How Does BEDZ Fit in a Portfolio?
As we are moving through the COVID-19 outbreak, 88% of U.S. consumers have shown their intention to return to travel, both for business and leisure. U.S. hotel demand for 2021 is forecast to be at 76% of 2019’s level and full recovery is expected in 2023,
as quoted on AdvisorShares.com.
Plus, global travel and tourism make up about 10% of global GDP. With big U.S. hotel chains having considerable global presence, the business is well poised to take advantage of not only U.S. economic rebound, but also global economic improvement as well as the widespread COVID-19 vaccine drive.
May be the latest news of worsening COVID-19 conditions globally could be a drag on the performance of the fund now, but sooner or later reopening trade will win over COVID-19 and that will be the winning point of the fund BEDZ (read:
Travel & Leisure ETFs Ready to Bloom in Spring). Competition: The fund could face competition from the likes of Invesco Dynamic Leisure And Entertainment ETF ( PEJ Quick Quote PEJ - Free Report) and ETFMG Travel Tech ETF AWAY. Though these funds are not exactly the same as BEDZ, some of their holdings have commonality. PEJ, which caters to hotels, restaurants and some other forms of entertainment too, charges 63 bps in net fees.
AWAY tracks the performance of the globally exchange listed equity securities or corresponding ADRs or GDRs engaged in Travel Technology Business, which provides technology, via the Internet & Internet-connected devices such as mobile phones, to facilitate travel bookings & reservations, ride sharing & hailing, travel price comparison & travel advice. The fund charges 75 bps in fees.
EATZ invests solely in the restaurant and food service industry, including restaurants, bars, pubs, fast food, take out facilities and food catering services. The United States has about 87% exposure to the fund, followed by Cash (6.4%) and China (3.6%).
Like BEDZ, EATZ too holds about 50 stocks. Jack In The Box (6.08%), Del Taco Restaurants Inc (5.77%) and Yum! Brands (5.68%) are the top three holdings of the fund. The fund charges 79 bps in net fees.
How Does EATZ Fit in a Portfolio?
The industry looks to be better positioned as
restaurant employment rose for the third successive month in March. However, despite the recent gains, eating and drinking places are still 15% jobs short from their pre-pandemic level. Sales rose strongly in March 2021 which stood at $62.2 billion versus $30.0 billion recorded in April 2020. Delivery services have also kept the industry thriving amid the pandemic. Competition: The fund could face competition from PEJ as the fund holds some restaurant stocks. Investors should also note that the fund serves the restaurant industry. We had two pure-play restaurant ETFs before and both closed probably due to lack of assets. Bottom Line
As the world nears one billion vaccinations, chances of returning to normalcy are strengthening. Pent-up demand will surely leave a profound impact on the industry. U.S. fiscal stimulus will also play a great role in helping these two industries take off in the medium term.
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