VettaFi VP Tom Lydon discussed the ETF Pacer Industry and Logistics (SHPP) on this week’s “ETF of the Week” podcast with “Money Life’s” Chuck Jaffe.
Despite the challenges on the supply side, demand for goods has not only remained high, but has actually increased over the past year, putting constant pressure on demand for global supply chains.
“What that means is that the companies involved in providing the infrastructure, the operations, the logistics, there aren’t that many,” Lydon explained. “For those companies serving this sector of the market, business is good; profitability is also excellent.
This is a new fund coming to the market, but in a challenging market environment of rising rates and inflation, this is an opportunity to invest in a sector of the market that is likely to continue to see pressure. positive yield pressures. Supply chain issues are expected to persist, especially given the environment and broader global macro issues.
“For example, when you look at Apple, Apple continues to have high demand, but you have different companies around the world affecting each piece that then has to be transported from A to B to make it all work,” Lydon said. .
High demand means that if a company like Apple has problems receiving a product, they’ll be more willing to pay higher prices to ensure they get the parts they need for their products.
The index the fund seeks to track, the Pacer Global Supply Chain Infrastructure Index, is a rules-based index, which Jaffe says lends credence to the fund’s ability to invest from the start. In addition, the fund also offers dividend potential, with a dividend yield currently above 3%.
“What that means is that these companies that are part of the supply chain infrastructure are profitable, and with those profits, they pay higher dividends to their shareholders,” Lydon said.
More than half of the index is made up of freight transportation and infrastructure services, industries that aren’t expected to see a downturn anytime soon, with rising prices that can be passed on to consumers.
“I think if you look at the S&P 500, and now that we’ve hit bear market territory, you’re going to see more and more of these shifts in areas of the market that, at least in the short term, seem to be more stable. Lydon explained.
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