Top Picks 2021: Defiance Next Gen Connectivity ETF (FIVG)

01/14/2021 5:00 am EST

Focus: TECHNOLOGY

John Persinos

Managing Editor, Personal Finance

Defiance Next Gen Connectivity ETF (FIVG) seeks to track the total return performance, before fees and expenses, of the Bluestar 5G Communications Index, explains John Persinos, editorial director at Investing Daily.

This ETF uses a passive management approach to track the total return performance of the index. It is the first exchange-traded fund focused on global companies whose products or services address the development of 5G networking and communication technologies.

5G is the fifth generation technology standard for broadband cellular networks, which cellular phone companies began deploying worldwide in 2019. As its name implies, 5G is the successor to the 4G networks which provide connectivity to most current cellphones.

The companies developing and leveraging 5G wireless are huge money-making opportunities. 5G technology will provide faster and higher capacity transmissions to carry the massive amounts of data that will be generated by the Internet of Things (IoT).

5G will facilitate IoT by allowing several interconnected electronic devices and machines to communicate with each other instantaneously at ultra-fast speeds.

IoT devices exchange information with each other via a central server, without a human being as intermediary. They use sensors to communicate actionable data, such as fuel levels, inventory capacities or room temperatures, through a wired or wireless network to a software application.

FIVG is the best-of-breed benchmark for 5G, providing a pure-play investment into the leaders of this wireless revolution. FIVG takes a multi-cap approach, focusing on growth-oriented firms involved in research, development and commercialization of new infrastructure that supports connective technology.

The fund’s biggest holding (6.85% of assets) is chipmaker Qualcomm (QCOM). Qualcomm will be one of the biggest beneficiaries of 5G growth. The company owns intellectual property tied to code division multiple access (CDMA), a vital technology that underpins all 4G and 5G standards.

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The fund’s other top holdings are in the 5G vanguard as well. FIVG’s number eight holding is Verizon (VZ), at 2.85% of assets. Verizon is pushing forward with improving its telecom business, developing 5G technology and expanding its fiber optics network. The profits you see as an early 5G investor could be exponentially greater than they were for any Internet-era company.

5G’s inexorable momentum spells opportunity for the shareholders of the chipmakers, telecoms, systems builders, and device makers that benefit from lightning quick connectivity. These 5G players are well represented in FIVG’s portfolio.

Experts estimate that 5G will eventually add $3.5 trillion to the U.S. economy. Smart homes, smart cars, smart offices — the dreams of science fiction are becoming daily reality.

That’s what makes 5G-related companies particularly appealing: an investment in 5G is an investment in the future. 5G plays should be resistant to economic ups and downs and headline risk.

When the pandemic eventually wanes, consumers will be clamoring more than ever for these conveniences in their personal and professional lives. 5G makes work-at-home devices run faster and better. I expect the start of a secular bull market in 2021, fertile ground for FIVG to outperform.

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