AWAY - AWAY: ETF For The Modern Travel Boom Hold-Rated But Interested

Summary

• AWAY is the first ETF to measure the performance of technology companies involved in providing services to the global travel and tourism industry.
• Holdings include companies that provide services such as bookings, price comparison, ride sharing and travel advice via mobile phones or other internet-connected devices.
• Increased use of smartphones to conduct daily activities, including purchase transactions, is long-term bullish for companies that fit into this ETF's theme.
• The travel industry is growing, but the post-pandemic surge is likely topping out for a while. So my long-term enthusiasm for AWAY is tempered by some short-term hurdles.
• I'm not staying away from putting AWAY on my watchlist of unique, relatively undiscovered ETFs. But my current rating is Hold.

By Rob Isbitts

Strategy

ETFMG Travel Tech ETF (AWAY) aims to track the performance of technology companies who intend to capitalize on a new era of digitized travel and tourism. It includes companies that complete the life cycle of tourism along with price comparison to post travel reviews. AWAY defines the “Travel Technology Business” as companies using the internet and devices connected to it to book travel reservations, ride sharing, travel price comparison, and get advice about travel.

ETF Grades

• Offense/Defense: Offense

• Segment: New Growth

• Sub-Segment: Travel

• Risk (vs. S&P 500): Low

Technical Ratings

• Short-term (next 3 months): B

• Long-term (next 12 months): A

* Our assessment of reward potential vs. risk taken

(Rating Scale: A=Excellent, B=Good, C=Fair D=Weak, F=Poor)

Holding Analysis

AWAY is a fairly concentrated ETF, with its top 10 holdings taking up of this 44% of the total portfolio. In fact, the top 25 holdings of the nearly 40 this fund holds account for more than 90% of assets. This is also a very global ETF, with 11 countries represented. US-based companies are 42% of AWAY, and Asia takes up nearly as much space in the "suitcase" of this fund. It checks in at 39% of assets.

Strengths

ETFMG Travel Tech ETF holds a variety of companies that are a part of the roadmap of a modern vacation. According to the studies ( The future of tourism - GeographyCaseStudy.Com ), global tourism could grow to be an $11 Trillion business by 2027. This would make it a significant contributor to global GDP. With such a projected increase in travel and tourism, technology companies are essentially the connectors from an idea to a plan to a transaction, and ultimately to an experience. Features such as virtual assistants and other technological advances have transitioned the travel industry to one that is much more user-friendly than in the past. In addition, global consumers now make more informed decisions while planning their vacations, with the help of online reviews.

Weaknesses

AWAY is a relatively small ETF, at $164mm in assets. It does not trade in huge volume, with only about $1.25mm a day traded. That may prevent some institutions and financial advisors from plowing capital into this fund. However, the low volume may imply that owners of AWAY are longer-term investors, since such a small percentage of the asset base changes hands on an average day.

Opportunities

Maybe you haven't heard of "revenge travel." But mashable.com defined it as traveling as a way of making up for lost time during the pandemic. This is already apparent in airports and travel/tourist destinations. It remains to be seen if this headwind for the travel industry, and the types of companies AWAY owns, will be long-lived. But even if it takes a break during a recession, the pent-up demand is still likely to work its way through the economy for a while. In addition, the global exposure of AWAY might just be its finest feature in the year ahead. The US Dollar is looking weary, and a sustained decline in the world's benchmark currency would have a positive impact on the majority of this ETF's holdings, as they are non-US in nature.

Threats

AWAY does not produce a dividend, and its Expense Ratio is on the high side at 0.76%. As I have noted in many other ETF profiles, I do not let a sub-1% Expense Ratio deter me from owning an ETF. As I see it, the cost of missing out on strong investment returns, whether tactically or longer-term, is much greater than a few basis points. But I certainly realize I am not speaking for all investors with that view. AWAY is also a relatively new ETF, approaching its 3-year mark. That implies we have not really seen this unique basket in action for long enough to truly understand how it may do over a longer time period.

Conclusion:

ETF Quality Opinion:

There are many authors within and outside of Seeking Alpha who can tell you all about the biggest and best-known broad market ETFs. We applaud those efforts. But our mission at Modern Income Investor is to look deeper, to help investors discover niche ETFs they can consider for their portfolios. AWAY meets that "undiscovered" criteria very well, and we are looking forward to following this newly-defined industry.

ETF Investment Opinion:

AWAY looks like it has a chance to perform, based on its chart pattern. But despite that potential, and our long-term enthusiasm for this area of the stock market, I'm limiting our rating to Hold, in hopes of finding a better entry point in a weaker broad stock market.

For further details see: