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Key points
- ETFs can be an effective way to invest for the long-term
- One ETF with underlying growth is one from VanEck which focuses on the global video gaming and e-sports sector
- The NASDAQ 100 ETF from BetaShares is another investment that has a lot of holdings that are growing
On the ASX there are some high-quality exchange-traded funds (ETFs) that look like they're capable of producing attractive long-term returns.
Businesses which are growing revenue at an attractive rate and are growing profit margins give themselves a good chance of producing bottom line growth that investors like.
Whilst some ETFs predominately own businesses that aren't generating much long-term compound earnings growth, others have holdings that are making a lot of progress:
VanEck Video Gaming and Esports ETF (ASX: ESPO)
This ETF is all about the global video gaming and e-sports sector. It has seen its price fall by more than 13% over the last two months. This may be a chance for investors to look at the ETF when it's at a cheaper level.
There is a lot of consumer demand for video games and e-sports. This demand has been growing for a long time. Since 2015, e-sports revenue has grown by an average of 28% per year according to the Newzoo Global Esports Market Report.
The competitive video gaming audience is expected to reach 646 million people globally in 2023. E-sports reflects the convergence of entertainment, video gaming, sports and media businesses.
VanEck says that with an active, engaged and relatively young demographic, the stage is set for sustainable long-term growth. The average age of e-sports enthusiasts is under 30.
The Asia-Pacific region was forecast to generate game revenue of US$78.4 billion in 2020, accounting for 49% of the global games market.
There are a number of high profile businesses in this portfolio, including Tencent, Nvidia, Advanced Micro Devices, Nintendo, Activision Blizzard, Sea, Netease, Electronic Arts, Take-Two Interactive Software and Bandai Namco.
However, Microsoft just announced that it wants to buy Activision Blizzard.
Betashares Nasdaq 100 ETF (ASX: NDQ)
This ETF has many of the leading American businesses in the portfolio. It's made up of 100 of the biggest companies on NASDAQ.
Many of the world's fastest-growing blue chips are in this portfolio – Apple, Microsoft, Amazon, Facebook/Meta, Tesla, Nvidia, Alphabet and so on.
The reason why the Betashares Nasdaq 100 ETF has managed to do so well over the past five years, with net returns of 27.7% per annum to 31 December 2021, is because the underlying businesses have performed so well. Many have introduced new products and services, growing their earnings and addressable markets.
But it's not just the biggest tech companies that are generating performance. Plenty of others are generating growth too including Netflix, Costco, PayPal, Qualcomm, Texas Instruments, Advanced Micro Devices, Intuitive Surgical, Moderna and so on.
As BetaShares says, in one trade on the ASX we can get access to companies like Apple, Amazon and Google, that have changed the way we live. Technology is a sector that is typically higher-growth but also under-represented on the ASX. This option gives us the ability to get exposure to great tech companies.
The ETF has an annual management fee of 0.48%. It has done very well in recent years, but past performance is no guarantee of future performance.
