'Good Times' ETFs On A Roll

April 12, 2018

Here in New Orleans, where I'm based, we have a saying: "Laissez les bon temps roulez," or, "Let the good times roll." Typically, we don't mean it as investment advice. But what if we did?

There are a number of ETFs now that aim to capitalize on "good times": gambling, video games and marijuana, booze … just to start. Maybe it's a sign of the times, but some of these funds are doing well performancewise:

 

'Good Times' ETFs
Ticker Fund Expense Ratio AUM Spread % 1 Year Performance
MJ ETFMG Alternative Harvest ETF 0.75% $322.95 0.26% -2.98%
PEJ PowerShares Dynamic Leisure & Entertainment Portfolio 0.61% $118.13 0.25% 8.75%
GAMR ETFMG Video Game Tech ETF 0.82% $102.15 0.24% 42.11%
BJK VanEck Vectors Gaming ETF 0.65% $50.01 0.51% 24.00%
PBS PowerShares Dynamic Media Portfolio 0.61% $49.34 0.25% 6.81%
WSKY Spirited Funds/ETFMG Whiskey & Spirits ETF 0.60% $15.01 1.54% 30.94%
ACT AdvisorShares Vice ETF 0.75% $13.83 0.65% N/A
IEME iShares Evolved U.S. Media and Entertainment ETF 0.18% $4.87 0.24% N/A

Sources: ETF.com, FactSet. Data as of April 11, 2018

 

Vice ETFs

Vice ETFs attempt to capitalize on the human desire to drink or smoke one's sorrows away by investing in alcohol, tobacco and/or marijuana companies. Investors now have three options vice ETF options: a pure-play alcohol fund, a pure-play marijuana fund and one that blends both.

On the spirits side is the $15 million Spirited Funds/ETFMG Whiskey & Spirits ETF (WSKY), which tracks whiskey distilleries around the world, as well as retailers, that derive at least 50% or $500 million annually in revenue from whiskey sales.

Though small, WSKY has had a good run lately, rising 28.8% over the past 12 months. It doesn't come cheap, however: WSKY charges 0.60% in expenses.

On the marijuana side, there's the $322 million ETFMG Alternative Harvest ETF (MJ). MJ is the only pure-play pot-focused ETF in the U.S.; it tracks companies that derive at least half their revenues from cannabis-related activities. In practice, it holds mostly Canadian growers and U.S.-based pharma research firms, but it also makes room for tobacco stocks, fertilizer makers and pesticide.

Over the past 12 months, MJ has dropped 3%, though that track record may be misleading given that until last December, MJ traded as a Latin American real estate fund. Since the index switch, losses have been more dramatic, dropping 8.7% since Dec. 26, 2017 and 15% year-to-date. MJ charges 0.75%.

For those seeking a little from both worlds, there's the $13.8 million AdvisorShares Vice ETF (ACT). ACT is an actively managed portfolio of alcohol, cannabis and tobacco companies. Since it's actively managed, ACT can invest across sectors and industries, leading to holdings in everything from retail to real estate. The fund, which launched last December, hasn't been around long enough for a one-year review, but year-to-date it has lost 3.3%. ACT charges 0.75%.

Casino ETFs

Currently, there are two main gambling ETFs: the $53 million VanEck Vectors Gaming ETF (BJK) and the $121 million PowerShares Dynamic Leisure & Entertainment ETF (PEJ).

Of the two, BJK is the purer play on gambling, as it tracks global casinos and gambling companies, such as Galaxy Entertainment (9%), Las Vegas Sands (8%) and MGM Resorts (7%).

PEJ, meanwhile, is a broader play that uses multifactor analysis to select entertainment and leisure companies; its portfolio include casinos and gaming stocks (27%), as well as hotels and cruise operators (21%) and airlines (19%).

At 0.65%, BJK is 4 basis points more expensive than PEJ, but its purer exposure to gaming stocks has helped give it a short-term boost over the PowerShares fund. Over the past 12 months, BJK is up 24%, while PEJ is only up 8.8%.

Over the longer term, however, PEJ has seen the better performance: Over a five-year period, BJK has risen 6.1%, compared with PEJ's 11.1% rise.

 

Videogame ETF

Investors can capitalize on the sizable gaming industry with the $102 million ETFMG Video Game Tech ETF (GAMR), an ETF that tracks global video game makers, sellers and users. GAMR's mandate is broad, within holdings in hardware and software developers, virtual reality-firms, IP developers and electronics conglomerates. Though at 36%, U.S. stocks dominate the portfolio, Japanese and Korean companies are also well-represented in holdings (26% and 11%, respectively).

Over the past 12 months, GAMR has risen 42.1%. Investors pay a steep fee of 0.82% for that performance, however.

GAMR comes with one extra caveat: It is one of five funds that have had to shoulder the ongoing legal costs of its parent company, ETF Managers Group. In January, the company revised GAMR's total operating expenses up 0.07% in connection with lawsuits filed by PureShares and Nasdaq, and it's impossible to tell if further revisions may be in the cards. (ETFMG's other ETFs on this list, MJ and WSKY, were not affected. Read more at: "Investors Shoulder ETFMG's Legal Costs.")

Must-See TV ETFs

Who says a good time means leaving the house? Investors have two media and home entertainment ETF options: the $49.3 million PowerShares Dynamic Media Portfolio (PBS) and the $4.9 million iShares Evolved U.S. Media and Entertainment ETF (IEME), which just launched last month.

PBS offers a multifactor take on the U.S. media stocks, with a portfolio that holds mostly media and publishing companies but also IT stocks, software firms and retailers. Netflix is PBS' top holding (6%), naturally, followed by Sirius XM (6%) and Time Warner (6%).

Over a 12-month period, PBS has gained only 4.86%, which isn't much considering its steep 0.61% fee.

IEME, meanwhile, is one of a new suite of actively managed iShares funds designed to provide marketlike exposure by using machine-learning techniques to classify, select and weight stocks. Despite its AI twist, none of its holdings is particularly surprising: Its top three stocks are Disney (7%), Comcast (7%) and CBS (5%).

IEME charges just 0.18%, making it by far the cheapest "good times" ETF in our list.

Good Times Don't Come Cheap

With the exception of IEME, none of these highly thematic ETFs comes cheap; thematic ETFs rarely do.

Some of these ETFs also tend to be thinly traded, with wide spreads. WSKY, for example, carries a whopping 1.54% spread.

Contact Lara Crigger at [email protected]

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