New ETFs Veer From Vanilla

July 20, 2017

ProSports Sponsors ETF (FANZ)

According to SportsETFs, a new entrant to the ETF market, research has demonstrated that investing in companies that partner with sports leagues in the U.S. represents a compelling investment opportunity.

These businesses believe they can increase brand awareness, as well as grow revenues and market share through their attachment to sports. The firm’s research also shows that partnerships with the major professional sports leagues have an influence on the purchasing decisions of fans following their favorite sports in person or on TV.

CFRA has not conducted a thorough review of the valuation and risk consideration of the portfolio. FANZ holds some stocks where we are bullish, including Amazon and FedEx, and others with valuation concerns, such as Take-Two Interactive Software (TTWO).

While FANZ is more specialized to sports, CFRA thinks there are some similarities to the American Customer Satisfaction Core Alpha ETF (ACSI), which launched in November 2016 and today contains $29 million in assets.

ACSI tracks a proprietary index using customer satisfaction scores to weight stocks within each sector. Amazon and FedEx are two such holdings, but so is CFRA-Hold-recommended BB&T; ACSI does not hold TTWO. ACSI receives a neutral CFRA ranking input for its Stars, but a positive input for the qualitative risk assessment of its holdings.

Both FANZ and the slightly older ACSI are examples of thematic products that could resonate with investors, based on their holdings, much like a novel ice cream flavor. But their approaches are less recognizable at first glance.

At the time of writing, neither the author nor his firm held any of the securities mentioned. Todd Rosenbluth is director of ETF and mutual fund research at CFRA, an independent research firm that acquired S&P Global Market Intelligence's equity and fund business in October 2016. He can be reached at [email protected]. Follow him at @ToddCFRA.

 

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