By now, you know I’m a “trend guy.” I build systems that identify emerging trends, and then I ride those trends higher until they reach their logical conclusion. And then I move on to the next trend … rinse and repeat.

I was thinking about this when I read about an exchange-traded fund (ETF) that recently hit the market: the Amplify Thematic All-Stars ETF (NYSE: MVPS).

Per the press release, MVPS is “a core thematic ETF that invests in the themes and stocks considered the purest and most attractive as determined by U.S. ETF ownership data.” In other words, it invests in what’s popular at any given time.

The ETF’s managers identify themes and ETFs that follow those trends. Here are some examples of themes MVPS tracks:

  • Disruptive Technology.
  • Evolving Consumer.
  • Health Care Innovation.

Then they build an index of the most widely-held stocks within those ETFs, and MVPS invests in that index.

In other words, MVPS is a thematic ETF that rips the most popular stocks out of other thematic ETFs.

A Deep Dive Into the MVPS ETF

It’s a novel idea, and it’s nice to have a “one-stop shop” for macro trend stocks. But I’m not going to recommend you run out and buy this ETF just yet. It’s still brand new and too thinly traded for my comfort level. Its trading volume is just below 11,000 shares per day. Compare that to one of my favorite ETFs, ARK Genomic Revolution ETF (NYSE: ARKG), which trades around 900,000 shares per day.

Just for grins, let’s take a peek under the hood to see what stocks MVPS owns. What are the dominant “theme stocks” according to its managers?

The top five holdings are familiar names that you might find in a typical growth fund:

  • Tesla Inc. (Nasdaq: TSLA).
  • Nvidia Corp. (Nasdaq: NVDA).
  • Square Inc. (Nasdaq: SQ).
  • com Inc. (Nasdaq: AMZN).
  • Alphabet Inc. (Nasdaq: GOOGL).

If you keep digging, you’ll find some more exotic names, such as Fate Therapeutics Inc. (Nasdaq: FATE) or Renewable Energy Group Inc. (Nasdaq: REGI). But the vast bulk of the ETF’s market cap is made up of the same trendy growth stocks everyone else already owns.

We can do better than this.

Find a Better Way to Invest in Trends

In Green Zone Fortunes, we know that we can’t expect to beat the market by being the market and owning the same stocks everyone else like the MVPS ETF does.

Instead, we identify themes that are out of the mainstream.

  • We made genomics, or DNA-based medicine, one of our most critical themes.
  • We were investing in infrastructure plays last year, months before President Biden’s infrastructure bill dominated the news cycle.
  • We even covered the rise of healthier eating and competitive adult videogaming.

Even when we’ve chosen to invest in a popular theme, such as green energy, we find new and innovative ways to do it. Rather than buy overpriced and volatile electric vehicle stocks, we recently recommended a traditional automaker that is quietly emerging as the dominant player in the space. It even has the productive capacity and the experience to utterly bury Tesla.

But importantly, we don’t invest based on themes alone. Every stock in our portfolio goes through a strict six-factor rating system that evaluates value, momentum, growth, size, quality and volatility. Rather than buying whatever stock in a theme, we find the very best stocks within that theme.

I mentioned genomics earlier, and the technology I call “Imperium” will spark the biggest investment mega trend in history … with one small Silicon Valley company at the center of it all. To learn more about this trend that Tesla CEO Elon Musk called “amazing,” click here.

To good profits,

Adam O’Dell

Chief investment strategist, Money & Markets