Build An ETF’ Shortlist & Winner Announced

Bryce: [00:01:12] Welcome to Get Started Investing, a series of lessons to help you on your investing journey. This is for anyone who wants to start investing but isn't really sure where to start. Our aim is to make the markets accessible to anyone. My name is Bryce and I'm joined by my equity buddy Ren. How's it going, bro? [00:01:27][15.2]

Alec: [00:01:28] I'm very good. Bryce today is the day. It is the Monday. The launch of our Everything ETF series. Yes, we've crowdsource questions and we've really gone back to basics for people who aren't even sure what the acronym ETF stands for. And then we sort of go from there to talk about what you can buy. And then ETF aftercare, not Afterpay. That's a separate business idea that I want to pitch, but ETF aftercare, you know, like signing up to a share registry, dividend reinvestment plans, all that stuff. So hopefully all the questions that you have about ETFs will be answered today. But that's not this episode, not this episode is to announce the winners of our Build an ETF competition. Yes. To get people thinking about ETFs, we put a thousand dollars on the line and we said, give us your best ideas. And we got inundated with some absolute crackers. [00:02:22][53.6]

Bryce: [00:02:23] It was epic to say we had what how many come through? Almost three hundred or so. [00:02:27][4.0]

Alec: [00:02:27] 300 people. Yeah, three Afterpay. Multiple suggestions from a lot of people. Some people tried to submit the same idea twice that did not get that did not increase their chances of winning, I have to say. But four points for trying. Yeah. [00:02:39][11.8]

Bryce: [00:02:39] So it was just awesome to see so many creative, some really funny ideas come through. Some, some that we even thought, wow, this is something that we would personally love to invest in. And beta shows we're trying to get access to the super secret file to, um, to try and boost their sort of strategy of product over the next few years. So before we jump into some of the key themes, Ren, are you going to run through some of the funny ones and we'll go through a few of our favourites and then release the results and the winner who walks away with a thousand dollars towards their next ATFP purchase or stock purchase just to run it? [00:03:12][33.3]

Alec: [00:03:13] Really, we're just giving them a thousand dollars. Wow. Yes. We're not going to check up on what you spend it on. Well, we will, but I would suggest investing. Yes. [00:03:20][7.2]

Bryce: [00:03:21] The rules were obviously to pitch an ETF, give us the name of the ETF, what the ticker would be, what the major focus is, a bit of a description and then perhaps some of the stocks that might fall within that ETF. And it was just awesome to see so many people and members of the community putting a lot of thought into this. So let's kind of go through some of the major themes that started resonating in [00:03:42][20.9]

Alec: [00:03:42] the spirit of making people wait right until the end of the episode. We'll talk about some of the major themes, then we'll talk about some of the ones we thought were pretty funny or worth discussing. And then we'll go through some of our favourites and then announce the winner. So I know everyone is sitting on the edge of their seat waiting to hear, but we are going to drag this out like American TV awards show. [00:04:02][20.7]

Bryce: [00:04:03] James Montlake. [00:04:05][2.1]

Alec: [00:04:07] I think if we start with some of the key themes, I thought there was some crackers that came through and there was clearly some key themes that the Equity Mates community particularly interested in. So Baidu shares Vanguard, BlackRock, Vannak, listen up, because this is where you should be thinking about in terms of the themes that people are interested in. I think the most entered theme is that the right word? Yeah, water, energy and sustainability, climate change, move towards a circular economy, the management of water resources, all really big themes that came through. Obviously a big focus for the Equity Mates community. Second, most was and I don't know what this says about our community, maybe they've been influenced by you a little bit too much. But the second biggest theme was the voice stocks. Oh, cigarettes, the gambling, the alcohol stocks, ETFs made up of fossil fuel producers and cigarette makers. People are obviously suggesting an anti ethical investing vibe, potentially being just a little bit contrarian. But that was a big one that came through. So your influence is being noted on the Equity Mates [00:05:19][72.0]

Bryce: [00:05:20] by false [00:05:20][0.4]

Alec: [00:05:21] influence. Another one that I particularly liked that I think we will probably see in the coming years was around diversity and especially female presence on boards and in executive teams holding ETF of stocks that have like 40 percent representation of women on boards and stuff like that. So I thought that was a particularly good one by now. Piloto, that was a big one [00:05:44][23.3]

Bryce: [00:05:45] worldwide or just Australia. [00:05:46][1.0]

Alec: [00:05:46] Every flavour of buy now pay later that you could want. But that's obviously to be expected given the massive growth. That industry weighed was a big one. Is there a way that you want? [00:05:58][11.8]

Bryce: [00:05:59] Not no, not in [00:05:59][0.6]

Alec: [00:05:59] Australia, but overseas, especially in the States? Yeah, two more that I particularly liked. One was around IPOs. So it was like using the fact that an ETF has considerable money behind it to invest pre-IPO and then sell like six months after IPO. And given the amount of hot IPOs that we say, probably more in the US than Australia, that was an interesting thing [00:06:23][23.9]

Bryce: [00:06:24] that you're not sorry, you have to really actively manage that one. [00:06:26][2.6]

Alec: [00:06:27] Yeah, it's not exactly a passive ETF. The last one that I particularly liked and I thought worth talking about was a number of people that suggested sport ETFs. And there are a number of sport ones which I thought were good and gaming related ones. But there was some that came through where it was like, you know, own all the publicly listed sports teams around the world. So, you know, the Brisbane Broncos in Australia, Manchester United football team in the in the UK, a few NBA and NHL hockey teams in the US and build an eighth around all the publicly listed sports teams around the world, which I thought was an interesting one. And that took your interest. [00:07:05][38.4]

Bryce: [00:07:05] I mean, you've covered a lot of the ones that I think were appealing alternative assets Ren something that I think we both have a bit of an interest in. And I'd be keen to understand more about some of the underlying stocks that they thought would fit within that. I didn't actually see that entry, but I see you've written that down here. So that would be appealing. [00:07:22][16.6]

Alec: [00:07:23] One of the alternative assets was Pokemon cards. And yeah, [00:07:26][3.2]

Bryce: [00:07:27] I did say that actually that's not [00:07:28][1.0]

Alec: [00:07:28] bad. There was one category that I'm surprised that you didn't talk about that really tried to apply to the job in retail was massive fame. And there were a number that really spoke about your expertise in the retail space and name checked you in their entries. [00:07:43][14.6]

Bryce: [00:07:44] So, I mean, thank you very much. I am a retail whisperer, but is a brick and mortar or was it just [00:07:51][7.8]

Alec: [00:07:53] I mean, there's a variety there were some that were quite compelling what it was like, the more niche retailers, like the thematic retailers like Wesfarmers for Bunnings and then Kathmandu and super retail group that owns like boating, fishing and camping, stuff like that, the ones that aren't just general retail like Kmart and yet targets, although they're both owned by Wesfarmers. [00:08:12][19.9]

Bryce: [00:08:13] So mine would be a retail ETF that has retailers that are niche specialists and have more than 50 percent of sales generated online. [00:08:24][10.7]

Alec: [00:08:24] OK, that's coming out of your mind. I didn't say that one come through, so you should have submitted it. [00:08:28][3.8]

Bryce: [00:08:29] I did under the name Roger. Moving on, let's chat about some of the funny more nations that have come through and then would do a bit of a Deep Dive on our favourites. [00:08:37][8.6]

Alec: [00:08:38] I think the prise, unfortunately, there's no monetary prise, but the prise for the most Nasch ETF suggested goes to Ashley, who submitted a oat milk ETF chase. What? Very nice. I couldn't give you a number of stocks, [00:08:54][15.6]

Bryce: [00:08:54] but obviously the thesis was that it's a growing trend and there's many benefits to oat milk and there's probably a number of companies that are going to start producing or getting involved in it to back the milk. Yeah, yeah, yeah. [00:09:07][12.5]

Alec: [00:09:07] There was actually just a more general milk ATFP as well. That was, you know, like, I guess like Fonterra or A2 Milk and those companies I can pretty nasch. I don't know if the ATF builders could get enough stock [00:09:19][12.1]

Bryce: [00:09:20] in milk more generally. Our milk I think is a dying industry. Do you. [00:09:24][3.7]

Alec: [00:09:24] Yeah. What's going to replace [00:09:25][0.8]

Bryce: [00:09:25] lactose free milk [00:09:26][0.7]

Alec: [00:09:27] covers. All that is it was like milk in the broadest [00:09:29][2.3]

Bryce: [00:09:30] sense of this almond [00:09:31][0.6]

Alec: [00:09:32] milk. And although it is. Yeah, yeah, yeah. Right now I know there are a few that came in that really focussed on the Equity Mates vibe, including one that said Bachal. Your retail picks, another that said short. All my stocks are you know what they are. No, they're not. [00:09:52][20.4]

Bryce: [00:09:53] They're good. I like that. [00:09:54][0.9]

Alec: [00:09:55] A few that came in around Motley Fool stock both long the you know, the articles are it's like three stocks you've got to buy now, both just long, whatever they produced in those, but also some that said, sure, whatever is fickle. So you could do a pair trade and buy both ETFs and net out there, a few around the work from home theme that I thought was particularly interesting. Obviously, some big companies in that space that have done very well during covid like DocuSign Zone, companies like that. And then the last one that I thought was interesting was a war themed ETF, Lockheed Martin, Boeing, all those big defence contractors, which is probably investing in a theme that you really don't want to have. [00:10:37][42.3]

Bryce: [00:10:38] But these companies exist. [00:10:39][1.6]

Alec: [00:10:40] They exist for a reason. [00:10:40][0.7]

Bryce: [00:10:42] So Ren, let's move to the some of our short lists. Maybe we do three each and we can do a bit of a you know, these are our shout out to those that really stood out to us. You did make the short list, but unfortunately there is only one. Winner, so how about we kick into that Ren, maybe we go one for one and they can announce the winner, can you tell [00:10:59][16.9]

Alec: [00:10:59] us one of yours to begin with? [00:11:00][1.1]

Bryce: [00:11:00] Well, I actually don't mind Daniel Lopez's entry worldwide pet industry. I have always been a fan of the pet industry. It's one of those industries that people pour money into, perhaps more so than they need to [00:11:15][14.9]

Alec: [00:11:16] pet to like a member of your family. [00:11:17][1.2]

Bryce: [00:11:18] Yeah, exactly. And you just see more and more companies coming to market with innovative products and essentially more ways for people to spend more money on their pets. [00:11:26][7.9]

Alec: [00:11:26] Shout out to my parents who just bought a dog. [00:11:29][2.7]

Bryce: [00:11:29] Yes, that's your. So Daniel Lopez, he came out with a worldwide pet industry. The ETF would be Pattee. It tracks, obviously, the major players in the pet industry, including veterinarians, obviously toy manufacturers, pet food, the likes to call pet of many families. And there are a lot of costs associated with owning pets. You know, that's the man's best friend. So some companies that would fall in this maybe fresh pet, chewy Zoetis, Zoetis, I'm not sure of that one. But look, I like the idea. I could say that when getting some traction [00:12:00][31.0]

Alec: [00:12:00] to up like one hundred and twenty percent this year. So obviously the market agrees that covid has been a good time for pets. A lot of people getting covid buddies. Yes. Yeah. So what are you got in terms of pets? Unfortunately, landlord doesn't allow it in terms of ATFP entry's one that I particularly liked that may not have such good short term prospects, but would have done incredibly well throughout the 2010s. Jared Stephens submitted Australian premium exports. ATF did take a code A IPEX APACS and it would be an ATF that would be made up of premium Australian exports across any industry or sector. And I mean, we've all seen the results of the China trade. So A2 milk is obviously one we've spoken about a lot on the show. Treasury Wine Estates. Blackmores was killing it on that. It's fallen off a lot recently, but there's a number of companies that are really benefiting from the growing Asian middle class, the increase in consumption that comes with that and the perception of Australia and New Zealand as a safe and clean environment. And so there's a number of companies that have done well there. And I thought that was a good idea, albeit with a little bit of a short term risk, given the escalating trade tensions, the geopolitical tensions with China. [00:13:25][84.4]

Bryce: [00:13:25] Yeah, it's a good idea. Absolutely. My second one, Ren, that caught my eye from Melanie Codi. And this kind of plays into the retail wheelhouse somewhat. It's called Global Most Trusted Brands. The ticker is brand. I like this. Just given that we know that companies you know, your apples, you Coca-Cola that are really trusted brands. There is research that shows that there is a direct correlation between consumer trust of a brand and also the profitability and more importantly, the longevity of that brand. And I think when you think about how Warren Buffett invests and the idea of competitive advantage and Moat's brand power is certainly a moat and a competitive advantage. So I like the idea of having an ETF that is managed that has, I guess, companies in it that are deemed to have incredibly strong, trusted brands. So, you know, as I said, Apple, Amazon, Coke, Samsung, Disney, NOK, you probably going to get a lot of the top 500 companies in there. But I think if you could narrow it down and get just a select few, I really like that one. [00:14:28][62.6]

Alec: [00:14:28] OK, my next one would be from Matt Brown and he submitted the theme of index leaders, Ticker I ZL. And the idea would be that it's basically the top 10 or 20 stocks from each share market index around the world. So some of the major share market indexes in Australia, we have the ASX 200. So would take the top 20 companies from that in America that have the S&P 500, it would take the top 20 companies from that. In Germany, they have the DAX. They would take the top 20 companies from that. In the UK, they have the Footsie. One hundred take the top 20 companies from that. I can go on, but you get the idea that you're basically getting the biggest companies in each market. And so, as Matt wrote, this particular ETF would have a superstar line up of CSL, Transurban, Apple, Amazon, Berkshire Hathaway, Veza, Unilever, like some of the biggest and most well known companies from around the world. So I thought that would be an interesting way to construct an index of the biggest and best companies from around the world. [00:15:35][67.0]

Bryce: [00:15:36] Yeah, nice man. There's a lot to go through Ren. But in the interest of time and I'm sure everyone wants to know who the winner is, I'll close mine out with one coming in from Dwayne Pinto, the R&D intensive ticker. [00:15:49][12.9]

Alec: [00:15:49] I like this one. I'm glad you said so. [00:15:51][1.4]

Bryce: [00:15:51] It's it's an interesting one. It can go. Two ways, but firstly, what is it, an ATF ticker R&D? Obviously, the objective is to comprise companies which invest heavily in R&D, the thesis being that you invest in companies that are able to create and deliver quality products to the public, thereby increasing revenue, increasing market share and their ability to reflect a growth mentality which ideally results in increased share price and or price of the ATF. But it is well known that companies that do spend a lot of money on R&D properly. You know, you think if you CSL not [00:16:28][36.7]

Alec: [00:16:28] to say [00:16:28][0.1]

Bryce: [00:16:29] they do generate a great return for the investors. The caveat being that a lot of companies also spend a lot of money on R&D that goes nowhere. So it's about finding the companies that are good at returning your capital or I guess what we call ROIC return on invested capital. And they're the companies that I would imagine comprise this ETF. So I really like that. [00:16:52][22.6]

Alec: [00:16:52] I agree. I think if you were going to construct this ETF, you would want to have R&D threshold as a percentage of revenue or percentage of profit or something like that, but then probably also a threshold for like a minimum return on invested capital. Yeah, but yeah, I thought this was a really interesting one. All right. My final one, it comes in from Kathee and her ETF is around the esoteric medicine market. I know something that you're particularly considering personally. And she has suggested the ticker look. Okay. And the aesthetic medicine market is basically plastic surgery and all other sort of medical treatments and devices and stuff like that that are focussed on making people look better. So Kathy writes that it's expected to be one hundred three point four billion dollar industry by twenty twenty six. It's growing at about nine percent a year. And you can understand how it will continue to grow as more innovation happens in this space. The cost of elective surgery and stuff comes down or it becomes, you know, safer and people are going to always want to improve their appearances. So I thought this was a particularly interesting one in a growing industry and one that I never thought of before. [00:18:10][77.8]

Bryce: [00:18:10] Yeah, I had not thought of it either. Ren considering it's not something I am going to see [00:18:16][5.4]

Alec: [00:18:16] we thought about investing in in terms of the share market. It's definitely something you thought about investing in. [00:18:21][4.6]

Bryce: [00:18:21] Personally, I'm not sure. Six great entries and we actually do have a few more on the short list Ren that maybe we be able to put up on the website so everyone can get across them if if we find the bandwidth to do that. So stay tuned. We'll let you know what the URL will be once we do. But Ren, I guess without further ado, it's probably now is the best time to actually announce the winner of the ETF competition and we can give away that thousand dollar burning hole in the back pocket. [00:18:47][26.6]

Alec: [00:18:48] Yeah. So the winner is Stu Kane and he has suggested the ETF Global Duopolies ASX ticket closed day. You do the thesis for this is it gives investors exposure to a diversified portfolio of duopoly companies with sustainable competitive advantages and phenomenal market share positions. And so Stu has given us a selection criteria. So the companies must be one of two market dominating players. They must have a combined market share of at least 50 percent. They must be in a growing industry or sector. They must have a strong competitive advantage. And he's actually given some ideas of the companies that could be in this ETF. And for me, you look at this and you think about how dominant these companies are in their respective sectors, and the ETF makes a lot of sense. So Coles and Woollies in the Australian supermarket business, Airbus and Boeing in the aircraft manufacturing business, Visa and MasterCard in payments, FedEx and UPS in US Postal Delivery, Pepsi and Coke in drinks. We get a bit nicer with the next one, Vodacom and MTN in South African telecommunications, but I imagine both very difficult to disrupt and dominant market positions. Samsung and Apple in phones, Apple and Microsoft in operating systems, Caterpillar and Konatsu in heavy machinery and vehicles, Nike and Adidas in sports footwear. Garuda and Lion Air in Indonesian air travel, Indonesian air travel. Apparently a massive business like the fifth biggest travel market in the world. A lot of people. A lot of people. Yeah, yeah. Amazon and Alibaba and e-commerce. Why K.K and SB's in Zipper's and. Yeah, you know, if you didn't know why KKR used to have 90 percent global market share for Zip's. Wow. Yeah. And then a Chinese company, SBS has entered the picture. But yeah. Why KKR used to just be this dominant monopoly. Zip's, Yeah, so for me, this was the winner for a couple of reasons, but the main one being it was just such a creative idea. Yeah, but it makes a lot of sense. It doesn't make all those companies have incredibly enduring moats and pretty difficult to disrupt [00:21:13][145.4]

Bryce: [00:21:14] good diverse range of industries as well. Ren. But to your point, very established companies, you know, you think about those, some of them are disrupting others, which is interesting. You look at sort of maybe what Microsoft and Apple are doing to maybe the payment system or what Amazon is doing to supermarket. [00:21:31][17.2]

Alec: [00:21:32] But the thing is, like the the payments example, everyone partners with Visa and MasterCard. It's true. You don't build your own payments infrastructure. [00:21:38][6.1]

Bryce: [00:21:39] That's true. Well, nice. Congratulations, Stu Cain, first winner of our annual ATFP competition. Wow. Wow. Just throw that out there. Now, that's not true. But as we said, it's been a really fun four weeks where we've been taking all of these entries in. So a big thank you to all of you out in the community who have taken the time to send in your entries. We will endeavour to get our shortlist up on the website SDU. We will reach out to you to organise your one thousand dollar prise. And guys, just a reminder that this is the precursor live in your feed now will be the three part ETFs for Beginners series where we've partnered with better shows to really, as Ren said at the start, walk back to basics for everything you need to know about ETFs before, during and after the buying of ETFs. So no matter where you are on your journey, there's going to be some information in there that will be applicable to you. I mean, Ren and I even learnt some stuff about the administration side that we often overlook. So worth sticking around and listening to that. So make sure you do listen and spread the word and. [00:22:45][65.8]

Alec: [00:22:45] Yeah, what a fun. And if any of the ETF providers want to get Stu's contact details to help construct this ETF global duopolies reach out to us, we'll pass them on. Otherwise, if it's not created in five years, we'll create this nice one. [00:23:03][17.4]

Bryce: [00:23:03] Ren. Well, again, congrats to make sure you all go and have a listen to the three part series on Get Started Investing feed. And we look forward to chatting with you soon as one. [00:23:11][8.2]

Speaker 3: [00:23:13] Thanks for listening to Get Started Investing feed production of Equity Mates media. Please remember that everything you hear in Get Started Investing feed is general advice. Only the content has been prepared without knowing your personal objectives, specific financial [00:23:26][12.2]

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