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Alex Kimani

Writer, Divergente Research LLC

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Divergente Research LLC and Safehaven.com. 

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6 Key ETFs For The Industrial Revolution’s ‘New Economy’

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Investors who want a piece of our futuristic reality will be eyeing everything from the creators of the latest drone tech to the minds behind cutting edge genetics and the endless applications of artificial intelligence. But it’s no longer a gamble on science fiction—it’s a reality enshrined in some of the most mouth-watering ETFs on the market.

This isn’t like waiting around for a cryptocurrency ETF to become a reality. This is the 4th Industrial Revolution, and it’s already working hard for investors, who are almost exactly a year-to-date into a set of ETFs that gives them coverage of anything and everything next-gen.   

The 2016 World Economic Forum (WEF) Future of Jobs Report outlined the skills and workforce strategy that will power the new economy aka the fourth industrial revolution, declaring:

“Today, we are at the beginning of a Fourth Industrial Revolution. Developments in genetics, artificial intelligence, robotics, nanotechnology, 3D printing and biotechnology, to name just a few, are all building on and amplifying one another. This will lay the foundation for a revolution more comprehensive and all-encompassing than anything we have ever seen.”

In December 2017, State Street Global Advisors, the world's fifth largest asset manager with $3 trillion in managed assets and U.S.’ largest ETF issuer, launched the SPDR Kenhso ETFs, a group of futuristic exchange-traded funds (ETFs) designed to capitalize on these emerging trends. Kensho Technologies is a leading provider of next-gen machine learning and analytics tools. The ETFs leverage Kensho’s proprietary algorithms and natural language processing platform to select the companies that drive the new economy. Related: This Week’s Major Pot Sector Shake-Ups

The asset manager started with three ETFs and has since added three more to its expanding portfolio. Here, we take a peek at these ETFs:

#1. SPDR Kensho Final Frontiers ETF (XKFF)

This is a relatively new Kensho ETF that was launched in October 2018. The index holds companies driving innovations in deep sea and deep space exploration. The fund is non-diversified and may invest in equity securities not included in the index, cash, cash equivalents or money market instruments.

This ETF could emerge as a big winner if the Pentagon goes through with its plans to establish a “Space Force.” Top 5 holdings are:

#1. SPDR Kensho Final Frontiers ETF (XKFF)

This is a relatively new Kensho ETF that was launched in October 2018. The index holds companies driving innovations in deep sea and deep space exploration. The fund is non-diversified and may invest in equity securities not included in the index, cash, cash equivalents or money market instruments.

This ETF could emerge as a big winner if the Pentagon goes through with its plans to establish a “Space Force.”

Top 5 holdings are:

• Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD)—5.72 percent portfolio weight

• Heico Corp (NYSE:HEI)—5.33 percent

• Teledyne Technologies Inc. (NYSE:TDY)—5.07 percent

• Caci International Inc. (NYSECACI)—5.06 percent

• Boeing Company (NYSE:BA)—4.71 percent

Top 10 holdings account for 47.78 percent of the fund’s assets.

#2. SPDR Kensho Intelligent Structures ETF(XKII)

One of the first three Kensho ETFs to be launched, this fund focuses on smart power grids, smart building infrastructure, intelligent water infrastructure and intelligent transportation infrastructure. Infrastructure is one sector that’s likely to enjoy bipartisan support in a split Congress.

Top 5 holdings are:

• Charter Communications Inc. (NASDAQ:CHTR)—4.91 percent portfolio weight

• Acuity Brands Inc. (NYSE:AYI)—4.26 percent

• ADT Inc. (private)—4.07 percent

• Roper Technologies Inc. (NYSE:ROP)—4.07 percent

• Alarm.com Holdings, Inc. (NASDAQ:ALRM)—3.96 percent

Top 10 holdings account for 39.98 percent of the fund’s assets.

#3. SPDR Kensho Future Security ETF (XKFS)

XKFS is also one of the earliest Kensho ETFs. The fund holds companies that are driving technological innovations in future security and military operations, including robotics, cybersecurity, drone technologies, and virtual/augmented reality technologies. The ETF’s holdings closely resembles what you would find in a traditional aerospace & defense ETF and, interestingly, has also been one of the better performing Kensho ETFs with all top 10 holdings firmly in the green over the past 12 months.

Top 5 holdings include:

• AeroVironment Inc. (NASDAQ:AVAV)—2.73 percent portfolio weight

• Fortinet Inc. (NASDAQ:FTNT)—2.35 percent

• Aerojet Rocketdyne Holdings, Inc. (NYSE:AJRD)—2.15 percent

• Imperva Inc. (NASDAQ:IMPV)—2.03 percent

• Rapid7 Inc. (NASDAQ:RPD)—2.01 percent

Top 10 holdings account for 21.14 percent of the fund’s assets.

#4. SPDR Kensho Smart Mobility ETF (XKST)

This investment tracks companies that operate in the smart transportation sector including autonomous and connected vehicles, advanced transportation tracking, transport optimization systems and drones.

Top 5 holdings are:

• AeroVironment Inc.(NASDAQ:AVAV)—4.96 percent portfolio weight

• Tesla Inc. (NASDAQ:TSLA)—3.73 percent

• Trimble Inc. (NASDAQ:TRMB)—3.50 percent

• Rogers Corp. (NYSE:ROG)—3.45 percent

• Fortive Corp. (NYSE:FTV)—3.25 percent

Top 10 holdings account for 33.29 percent of the fund’s assets.

#5. SPDR Kensho Clean Power ETF (XKCP)

This is one of the latter Kensho ETFs to hit the market. The fund invests in companies driving innovation in the rapidly growing clean energy industry.

Top 5 holdings are:

• Tesla Inc. (NASDAQ:TSLA)—4.40 percent portfolio weight

• AES Corp. (NYSE:AES)—4.34 percent

• NextEra Energy, Inc. (NYSE:NEE)—4.03 percent

• Sempra Energy (NYSE:SRE)—4.02 percent

• New Jersey Resources Corp. (NYSE:NJR)—3.91 percent

Top 10 holdings account for 39.70 percent of the fund’s assets.

# 6 SPDR Kensho New Economies ETF (KOMP)

The fund invests in companies that are disrupting the traditional industries in diverse sectors of the economy by leveraging advancements in artificial intelligence, exponential processing power, robotics and automation.

Top 5 holdings are:

• Elbit Systems Ltd (private)—1.77 percent portfolio weight

• Kratos Defense and Security Solutions, Inc. (NASDAQ:KTOS)—1.57 percent

• Raytheon Co (NYSE:RTN)—1.25 percent

• Apple Inc. (NASDAQ:AAPL)—1.23 percent

• Lockheed Martin Corp (NYSE:LMT)—1.17 percent

Top 10 holdings account for 12.52 percent of the fund’s assets.

KOMP is the cheapest Kensho ETF to own with an expense ratio of just 0.20% compared to 0.45% for the other five. Still, these ETFs are considerably cheaper than most thematic and niche ETF,s which charge 70-80bps.

Of course, investors can cherry pick individual stocks from each group and create their individual new economy ‘ETFs’.

By Alex Kimani for Safehaven.com

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