One of the most incredible stories of company growth is Tesla – the electric car company that climbed to a market capitalisation of more than US$1 trillion in just 11 years and became worth more than all of the top nine carmakers in the world combined.
It has even risen more than 1000% since the start of 2020, which is absolutely incredible growth.
It takes a special sort of talent to eclipse Toyota and Volkswagen when you are making fewer than 1% of the world’s cars but it is obvious that investors are happy to pay for technology and future returns rather than current sales.
There is now an interesting local way to get onboard that combination of technology and the move to electric cars with the launch of BetaShares Electric Vehicles and Future Mobility ETF (ASX: DRIV).
Not just cars but lots of technology
The local ETF provider said that the projected strong growth in electric car sales was only one of the trends that should help this ETF.
“The transition to smarter vehicles is likely to significantly increase the use of semiconductors and high-tech componentry in cars,’’ said BetaShares.
Of course, while Tesla will be a cornerstone shareholding in the ETF, it will contain up to 50 companies which cover many areas that are scarce on the Australian share market – including automotive technology and even technology driven ride sharing companies such as Uber.
At the moment, the top ten investments held by DRIV are Tesla, US listed Chinese electric car company Nio Inc, Aptiv PLC, a US electronic active safety auto parts provider headquartered in Ireland, ride sharing company Uber Technologies Inc, Volkswagen, Volvo, truck company Paccar and Chinese electric car companies BYD, Li Auto and Xpeng.
DRIV can hold up to 50 companies as long as they are involved in the future of transportation.
Large global spread
In terms of country exposure, the ETF at the moment is invested in the US (44%), China (20.3%), Germany (10.4%), Ireland (6.0%), Sweden (5.8%), Japan (5.0%), South Korea (3.3%), Netherlands (3.2%) and France (0.8%).
A similarly innovative ETF that has just been launched, the BetaShares Future of Payments ETF (ASX: IPAY), aims to provide exposure to a portfolio of global companies at the forefront of innovation in digital and mobile payments.
Mobile payments set to fly
With global mobile payments anticipated to increase from US$1.5 trillion in 2019 to US$12.1 trillion by 2027, it will provide exposure to up to 50 of the leading companies innovating in the global payments sector, including Visa, Mastercard, PayPal, Block and Affirm.
Like all of the thematic ETF’s which have become very popular of late, it is important to realise that unlike traditional ETF’s that cover a very broad index, these ones are much more concentrated so they can be expected to be more volatile.
That can be a good thing if the particular megatrend the fund is targeting is going well.
However, as we saw when China cracked down on its local technology companies, that can have a dramatic downward effect on ETF’s that happen to have a lot of Chinese technology shares, even if US or other technology shares are still going well.
Both of these ETF’s have higher management fees than the broad index funds – 0.67% for both DRIV and IPAY – but if the megatrends they aim to capture perform well, that will be a small price to pay.