O’Shares ETFs Q2 2020 Report:
Investing in Internet & E-commerce

The global pandemic has accelerated “at-home” investment trends. People have either chosen or been forced to work or shop from home. This has benefited many internet companies focused on online workplace collaboration and e-commerce.

New this quarter:

  • E-Commerce Adoption: Accelerated Growth?
  • Stocks for the “Stay-at-Home” Economy: Digital Entertainment, Social Media & Online Food Delivery
  • Trends in Cloud: “Work-from-Home” Cloud Based Software-as-a-Service (SaaS) Companies
  • Play-at-home stocks: Top Video Game Companies

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Mega Trends

Long-term, transformative forces that can influence or shape business, economies and cultures. Internet and e-commerce mega trends may have a profound impact on the way consumers and companies conduct business, communicate and consume entertainment.

What’s Driving Mega Trends

Secular trends in social media, digital advertising, digital entertainment and cloud have been a catalyst for growth in internet and e-commerce companies. The number of people using social media to stay connected continues to grow. Companies have moved from traditional advertising in favor of digital methods. Video games, video-on-demand, music streaming and e-publishing have continued to underpin the growth of digital entertainment companies. Finally, “cloud” has rendered conventional data warehouses virtually obsolete. These are just some of the many secular trends that drive internet and e-commerce “Mega Trends”.

Are you not entertained?
Top Companies in Digital Entertainment

What is digital entertainment? Broadly speaking, it can be broken down into 4 main categories: video games, video-on-demand, ePublishing and digital music. Digital entertainment revenue totaled an estimated $153 billion in 2019 and is forecasted to grow to ~$183 billion by 2024. Video games are the largest category at over $80 billion, followed by video-on-demand at over $30 billion, ePublishing at over $20 billion and digital music at over $13 billion.

Atop each of the digital entertainment pillars, sits 4 Internet companies. Chinese social media giant, Tencent, leads video games with an estimated $15 billion in revenue from the category. This accounts for approximately one fifth of the category’s sales. Video-on-demand is led by the streaming service, Netflix. At nearly $20 billion in revenue, Netflix makes up over half of the video-on-demand category revenue. Online retail giant, Amazon, leads ePublishing. In the U.S. it is estimated to account for over 80% of the ebook market. Music streaming service, Spotify, leads digital music with just over $7 billion in revenue in 2019 accounting for an estimated 50% of the global market.

Digital Entertainment Category Revenue from: Statista. All Other revenue data from Bloomberg; Category revenue data estimates as of the last fiscal year. Amazon E-book statistics from: Publish Drive: “Amazon Ebook Market Share 2019 – is it big enough?”
It is impossible to predict future growth and actual results may vary. The potential growth or decline of any sector or company does not represent the performance of the Fund.

What’s Missing From Generic Tech Indexes?

Generic Tech Indexes provide exposure to companies classified as Technology. One of the most popular classification systems is The Global Industry Classification System (GICS).

In September 2018, structural changes to the GICS standard were implemented which had a significant impact on the Information Technology sector.

Investors with exposure to generic tech Indexes may want to look under the hood.

The Tech Stocks That Aren’t In Many Tech Indexes

The FANG and BAT stocks were either re-classified or were never in “Tech” to begin with.

Average Revenue Growth: Over 20%.

Source: Bloomberg Finance L.P. Data as of 03/31/2020. Sales – Last FY: Most recent fiscal year revenue.
*Sales Growth TTM: Trailing 12 months. For top ten holdings of the OGIG ETF click here.
For informational purposes only. Not meant to represent the Fund.

Stocks for the
Stay-at-home Economy

COVID-19 has accelerated the “at-home” investment trend as people have either chosen or been forced to “stay-play-work-shop” from home. Internet technology and e-commerce stocks are likely to benefit as these trends may become permanent fixtures in society.

‘Work-From-Home’ Cloud-Based Software-as-a-Service (SaaS) Companies

The COVID-19 pandemic has many people staying indoors and working from home. The following companies offer online cloud-based communication and collaboration tools to make sure people working from home can stay productive.

Source: Bloomberg Finance L.P. Data as of 03/31/2020. Est. Sales Growth (2Y): Average estimated revenue growth of next two fiscal years.
For top ten holdings of the OGIG ETF click here.
Past performance does not guarantee future results. For informational purposes only. Not meant to represent the Fund.

The outbreak of COVID-19 has negatively affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund. Short-term performance may often reflect conditions that are likely not sustainable, and thus such performance may not be repeated in the future.

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