ETF Of The Week: Beyond Meat In Tech?

August 02, 2019

Plant-based meat substitute maker Beyond Meat (BYND) has captured its fair share of headlines lately. After its superstar IPO in May, the company's stock price has soared, then plummeted, with a secondary offering of shares set below market price announced Monday.

Curiously, the ETF with the largest allocation to this attention-grabbing stock isn't a small cap fund or an IPO ETF, but a tech fund.

Of the 23 ETFs holding shares of Beyond Meat, the $13.7 million AdvisorShares New Tech And Media ETF (FNG) has the largest allocation, at 4.5%.

 

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

 

However, in terms of market value, the Vanguard Small-Cap Value ETF (VBR) owns the largest amount of Beyond Meat: $13.1 million. No surprise there—a Vanguard ETF (or BlackRock one) often owns the largest amount of any given stock, simply due to the issuer's sheer size. Beyond Meat accounts for 0.10% of VBR's portfolio.

Why A Food Company In A Tech ETF?

But back to FNG, which is a curious ETF in many ways.

The fund is actively managed by a subadvisor, Sabretooth Advisors, which uses a quantitative stock selection process to determine specific holdings and technical analysis to decide the timing of purchases and sales.

(Notably, that active methodology leads to a mind-boggling amount of churn within the portfolio: For the year ending June 30, 2018, FNG's portfolio turnover rate was 799% (not a typo) of its average portfolio value.)

According to the prospectus, FNG "will concentrate its investments in the software and services industry, within the information technology sector." And 80% or more of the fund's net assets are to be invested in the stocks of technology and media companies.

Presumably, Beyond Meat fits this bill by the subadvisor classifying it as not a consumer staples stock but as a food technology firm, one that promises to disrupt the global meat industry with plant-based substitutes that look, smell and taste like the real thing.

"The idea behind [FNG] was to seek stocks that have the same underlying characteristics (growth/beta/disruption) of the FANG names, circa 2016-2017," said Scott Freeze, FNG's portfolio manager. "To that point, BYND [Beyond Meat] sets up as one of the premier companies meeting those criteria."

Hefty Allocation To Other AdvisorShares ETF

Beyond Meat is one of only 16 holdings in FNG, which also includes a substantial allocation (13%) to another AdvisorShares product, the $2.8 million AdvisorShares Sabretooth ETF (BKCH), a digital and cloud computing ETF. (Sabretooth Advisors also subadvises BKCH.)

FNG owns $1.7 million worth of BKCH shares, which accounts for roughly 61% of BKCH's current assets under management.

Other significant holdings include cloud communications firm Twilio (TWLO) (10%), online marketplace Trade Desk (TTD) (9%) and Canadian e-commerce firm Shopify (8%):

 

Holdings In FNG
Holding Portfolio Weight
AdvisorShares Sabretooth ETF 12.50%
Twilio, Inc 9.81%
Trade Desk Inc 9.27%
Shopify, Inc 7.94%
Smith Micro Software 7.34%
Roku Inc 6.91%
StoneCo 6.50%
MongoDB 6.43%
Amazon.com 6.10%
Pinterest 5.38%
Etsy, Inc. 4.98%
Square, Inc. 4.78%
Beyond Meat 4.52%
Microsoft Corp 3.75%
Amarin Corp 3.16%

Sources: ETF.com, issuer data; data as of July 31, 2019

 

Performance Lags Tech Sector

FNG is a portfolio that makes big bets—and often—but it's not clear that active management has provided much alpha for the fund's investors. Year to date, FNG is down 16.5%; in comparison, the vanilla Technology Select Sector SPDR Fund (XLK) is up 32.7%.

Maybe the fund's allocation to Beyond Meat will help: The company's stock price is up 164% since its May 2 initial public offering.

Contact Lara Crigger at [email protected]

Find your next ETF

Reset All