First Look ETF: Analyzing New and Interesting ETFs like NETL, HOMZ, and NERD
This is an excerpt from the video titled First Look ETF: Analyzing NETL, HOMZ, and NERD with Ron DeLegge at ETFguide.
Several years ago, Dos Equis, a beer brand, ran a “most interesting man in the world” campaign with a gray-bearded debonair gentleman who could do no wrong. On today’s episode, we’re going to APE that same smirky crusade, by examining the “most interesting new ETFs in the world.”
Be forewarned, some of the ETFs mentioned are upstarts and won’t necessarily have a $100 million plus asset base. They also won’t have the familiar brand power of an SPDRs, iShares or Vanguard. Nevertheless, they offer practical solutions for obtaining coverage to overlooked and underserved markets.
Let’s begin with the NETLease Corporate Real Estate ETF (NETL) which screens for equity REITs that focus on leasing properties to single tenants under net lease agreements that make tenants responsible for the payment of most, if not all, operating expenses.
While many REIT funds contain net lease REITs as a part of their holdings, but ticker symbol NETL is different because it’s a pure-play in the category. BTW, the “triple net lease” whereby the tenant pays the property taxes, insurance, and maintenance is the most common type of net lease.
NETL contains 24 holdings with W.P. Carey, Realty Income Corp., and National Retail Properties among the top three holdings. The fund charges 0.60% annually. The fund has accumulated around $40 million in assets and was introduced on March of 2019.
Next up is home Alone, Version 2.0! The problem with housing ETFs is their tendency to be dominated by heavy weights like Home Depot or Lowe’s. Instead of offering balanced exposure to the housing market, it distorts. That’s where the Hoya Capital Housing ETF (HOMZ) aims to overcome this problem by making sure key stocks within key segments of the housing market are being tracked and that no single company has too much say.
HOMZ’s underlying yardstick, the Hoya Capital Housing 100 Index, segregates its 100 stock holdings into four areas: home ownership and rental operations, home building and construction, home improvement and furnishings, and home financing, technology, and services. The home ownership and home building sub-sectors receive a 30% fixed weighting while the remaining two sub-sectors are limited to a 20% weighting. The overall effect is a more balanced approach to U.S. housing exposure.
The U.S. real estate sector represents less than 3% of the S&P 500’s exposure and HOMZ offers a novel solution for getting direct exposure to the housing market portion of it. HOMZ was introduced on in March 2019. The fund charges 0.45% annually and has around $10 million in assets.