The COVID-19 pandemic increased the demand for virtual reality (VR) as restrictions compelled most businesses and schools to operate remotely. VR is believed to be a game-changer as it digitally creates a three-dimensional environment and is the solution to some of the many problems the pandemic brought forward. The VR industry should witness further demand with the resurgence of COVID-19 cases and the increasing adoption in hybrid working environments.
Increasing penetration of advanced technologies and rising investments in cloud-based services are some of the key factors that should drive the growth of the VR market. According to a Grand View Research report, the VR market is expected to grow at a CAGR of 18% between 2021 and 2028.
While it may be risky to bet on a particular VR stock with rising competition in this space, a less risky way to capitalize on the industry’s growth could be betting on VR-focused ETFs. We think prominent VR-focused ETFs Communication Services Select Sector SPDR Fund (XLC), VanEck Vectors Semiconductor ETF (SMH), and Global X Robotics & Artificial Intelligence ETF (BOTZ) could be solid bets now.
Communication Services Select Sector SPDR Fund (XLC)
XLC is an exchange-traded fund launched by State Street Global Advisors, Inc. and managed by SSGA Funds Management, Inc. The fund invests in companies operating across media and entertainment, communication services, telecommunication services, and diversified wireless telecommunication services sectors.
With $15.99 billion in AUM, XLC’s top holding is Facebook, Inc. (FB), with a 23.38% weighting in the fund, followed by Alphabet Inc. Class A (GOOGL) at 13.01% and Alphabet Inc. Class C at 12.41%. It has an expense ratio of 0.12%, lower than the category average of 0.37%.
XLC pays an annual dividend of $0.50, which yields 0.59% on the prevailing price. The ETF’s average four-year dividend yield stands at 0.66%. XLC has gained 41.7% over the past year and 26.6% over the past nine months.
XLC’s POWR Ratings are consistent with its growth outlook. It has an overall grade of A, which equates to a Strong Buy rating in our proprietary ratings system. In addition, It has an A grade for Trade and Buy & Hold. Get XLC’s Peer grade here.
XLC is ranked #7 out of 55 ETFs in the Large Cap Growth ETFs group.
VanEck Vectors Semiconductor ETF (SMH)
Launched and managed by Van Eck Associates Corporation, SMH invests in companies operating across information technology, semiconductors, and semiconductor equipment sectors. The fund uses the full replication technique to track the MVIS US Listed Semiconductor 25 Index’s performance.
The fund has $6.07 billion in AUM. Its top holdings include Taiwan Semiconductor Manufacturing Co., Ltd. (TSM), with a 13.96% weighting, NVIDIA Corporation (NVDA) at 10.95%, and ASML Holding NV ADR (ASML) with 6.84%. The fund’s 0.35% expense ratio is lower than the category average of 0.54%.
SMH pays $1.50 annually in dividends to its investors, which yields 0.56%. Its average four-year dividend yield stands at 1.57%. Over the past year, the fund has gained 64.2%. In addition, it has gained 24.4% over the past six months.
It’s no surprise that SMH has an overall grade of A, which equates to a Strong Buy rating in our proprietary ratings system. In addition, it has an A grade for Trade and Buy & Hold.
Global X Robotics & Artificial Intelligence ETF (BOTZ)
Managed and launched by Global X Management Company LLC, BOTZ invests in companies operating across the development of robotics and/or artificial intelligence sectors. The fund seeks to track the performance of the Indxx Global Robotics & Artificial Intelligence Thematic Index.
BOTZ has $2.79 billion in AUM. Its top holdings include Keyence Corporation with an 8.62% weight, NVDA at 8.59%, and Intuitive Surgical, Inc. (ISRG) at 8.44%. The fund’s 0.68% expense ratio compares to the category average of 0.70%.
The fund pays an annual dividend of $0.06, which yields 0.15% at the prevailing share price. Its average four-year dividend yield stands at 0.59%. The fund has gained 45.1% over the past year and generated a 22.1% return over the past six months.
BOTZ’s strong fundamentals are reflected in its POWR Ratings. It has an overall grade of A, which equates to a Strong Buy rating in our proprietary ratings system. It also has an A grade for Trade, Buy & Hold, and Peer.
BOTZ is ranked #17 in the Technology Equities ETFs group. In addition to this, one can access all of BOTZ’s grades here.
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XLC shares were trading at $84.81 per share on Thursday afternoon, down $0.42 (-0.49%). Year-to-date, XLC has gained 26.13%, versus a 20.89% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...
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