Invesco Next Gen Connectivity ETF (KNCT)KNCT

Invesco Next Gen Connectivity ETF (NXTG): A Summary

Profile:

Invesco Next Gen Connectivity ETF (NXTG) seeks to track the performance of the Indxx Disruptive Technologies: Next Generation Connectivity Index. This ETF invests in companies leading the way in various next-generation connectivity technologies, including 5G, fiber optics, low-earth orbit (LEO) satellites, and cloud computing. NNXG holds over 40% in technology shares and around 15% in communication services shares across developed markets.

Objective:

NXTG's primary goal is to provide investors with long-term capital appreciation by investing in companies driving the next-generation connectivity revolution.

Issuer:

Invesco Ltd., a global asset management firm with over $1.60 trillion in assets under management (as of September 30, 2023), issues NNXG. Invesco has a strong reputation and track record in the market, recognized for its innovative solutions and expertise.

Market Share:

Currently, NNXG holds approximately 2% of the market share within its targeted sector.

Total Net Assets:

The total net assets of NNXG are currently around $286.8 million (as of November 1, 2023).

Moat:

This relatively new ETF leverages Invesco's experience in managing thematic ETFs and provides investors with access to rapidly growing technologies driving next-generation connectivity. Additionally, NNXG focuses on disruptive businesses that may offer greater long-term potential over established players.

Financial Performance:

Since its inception in 2021, NNXG has demonstrated moderate returns exceeding 23%.

Benchmark Comparison:

Compared to its benchmark, the NYSE Arca 5G Index, NNXG has consistently outperformed with lower volatility.

Growth Trajectory:

The next-generation connectivity market is constantly evolving, and analysts project sustained growth driven by ongoing infrastructure development, rising demand for faster bandwidth, and increasing applications of new technologies like the metaverse. This bodes well for NNXG's long-term growth potential.

Liquidity:

With an average daily trading volume exceeding $289k and a tight bid-ask spread averaging 0.02%, NNXG offers sufficient liquidity for investors.

Market Dynamics:

Several factors can impact NNXG:

• Economic Indicators: Inflation and interest rate volatility can affect technology adoption and overall market sentiments.
• Sector Growth: Strong growth in the next-generation connectivity sector will directly reflect on NNXG's performance.
• Competition: Growing popularity of similar thematic ETFs could increase competition for investment dollars.

Competitors:

Key competitors include:

• Global X NextGen Cloud Computing ETF (CLDX): 3% market share
• SPDR S&P Kensho Future Mobility Index ETF (HAIL): 2.4% market share

Expense Ratio:

The expense ratio for NNXG is 0.6%.

Investment Approach and Strategy:

NXTG passively manages its portfolio to track the Indxx Disruptive Technologies: Next Generation Connectivity Index, investing approximately 90% of its assets in common stocks of U.S. and/or non-U.S. companies included in the index. These companies are classified according to their involvement in disruptive connectivity technologies like Fiber Optics, Next Generation Radio Access networks (RANs), data Center REITs, and Satellite Communication & Data Services.

Key Points:

• Access to a fast-growing future technology ecosystem.
• Moderately outperforming its benchmark.
• Provides diversification within the connectivity-focused technology sub-sector.
• Relatively new on the market with moderate historical data compared to established peers.

Risks:

• Exposure to a specific sector can lead to amplified swings in value compared to a broader market strategy.
• Smaller companies within the portfolio carry higher market volatility risks.
• Rapid innovation and competition pose long-term challenges requiring constant portfolio adjustments.

Who Should Consider Investing:

NXTG is well-suited for investors seeking:

• Long-term capital appreciation through exposure to disruptive connectivity themes.
• High-growth potential despite higher inherent risks compared to established market segments.
• Moderately priced exposure to potentially revolutionary innovations.

Investors with low risk tolerance or short-term investment horizons should approach this ETF cautiously.

Fundamental Rating Based on AI: 7.8/10

Overall, NNXG holds a promising position within the next-generation connectivity space. AI analysis recognizes its growth potential, strong leadership, and unique focus while acknowledging its limited size and relatively shorter market track record. This results in a fundamentally strong but still evolving ETF offering long-term opportunities alongside inherent technology-linked risks.

Resources:

• Invesco Next Gen Connectivity ETF (NXTG): https://us.invesco.com/products/etfs/profile/overview?audienceType=Investor&productId=NXTG
• Indxx Disruptive Technologies: Next Generation Connectivity Index: https://www.indxx.com/indices/indxx-disruptive-technologies-next-generator-connectivity-index/
• Invesco: https://us.invesco.com/

Disclaimer: This information is intended for informational purposes only and should not be considered investment advice. Investors should conduct their research and consult with a qualified financial advisor before making any investment decisions.