The world is changing very quickly, moved by continuous digital disruption. Investors would do well to exclude stocks that fall behind the technology curve from their portfolio, according to Will Rhind, CEO of GraniteShares.
GraniteShares has recently launched the XOUT exchange-traded fund (XOUT:NYSE Arca), that executes this strategy.
“It’s our take on really how to tackle technological disruption in the world,” Rhind told Kitco News. “On the one hand, you pick winners, so that’s active management. Everyone picks stocks they think will outperform the market. On the other side, you have people that think that’s a load of nonsense, it’s not possible to do that consistently over time, so we just buy the market.”
Rhind’s focus is on screening out bad companies from an index.
The ten stocks excluded in the XOUT ETF are Walmart, Visa, J.P. Morgan, Verizon, AT&T, Coca-Cola, Bank of America, Exxon, Chevron, and Comcast.
On equities overall, Rhind noted that the markets are disconnected from reality.
“We’ve seen vast amounts of the economy being laid waste by the coronavirus pandemic. Vast sections of industry have been sidelined, that may never return. All this time, we’ve seen stock markets return almost to the highs we saw pre-pandemic, which is pretty incredible,” he said. “A lot of people see the rise in the stock market and are confused by this information.”
Rhind noted that the increase in fiscal stimulus, which would boost the gross domestic product, has helped to create this rally in equities.
Additionally, investors are following a “2008 playbook,” Rhind said.
“For equity investors, the trend [back in 2008] was just to buy the market. There was this concept of don’t fight the Fed, the trend is your friend, the government is going to backstop the market and therefore printing money helps drive the stock markets higher and I think there’s a lot of that that’s happening right now, that people are just thinking about that playbook from the last 10 years and just buying the market indiscriminately,” he said.
Gold prices still have a lot of room to climb.
“Let’s look at the 1980 high for gold. On an inflation-adjusted basis, that price would sit somewhere around the two and a half thousand dollars an ounce mark, so clearly we’re quite far away from that today in terms of breaching an inflation-adjusted all-time high,” he said.
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