Investors holding Australian blue chips vulnerable to digital disruption should consider hedging their portfolios with the tech-heavy US NASDAQ-100 index, says BetaShares.
Speaking to InvestorDaily, BetaShares managing director Alex Vynokur said Australian retailers will suffer when the likes of Amazon begin entering the local market.
Mr Vynokur was joined by NASDAQ vice president, global indexes, Dave Gedeon, who is in Australia to promote the BetaShares NASDAQ-100 exchange-traded fund (ETF).
The new ETF, domiciled in Australia, tracks the NASDAQ-100 (which excludes financial stocks).
Mr Gedeon said the entire business model of the big US retailers has been "put under fire" by the likes of NASDAQ-100 players like Amazon.
"You look at Amazon’s growth versus Walmart’s growth: two biggest retailers in the world are going on completely different trajectories," Mr Gedeon said.
Closer to home, Mr Vynokur said the likes of Woolworths and Coles are facing increased competition from German retailers like Aldi and US players like Costco.
"[There's] a lot of talk in Australia of Amazon coming into Australia and building distribution warehouses. That’s when you really get frightened if you’re a Woollies shareholder," Mr Vynokur said.
"NASDAQ-100 is a really good way to play that thematic and position your portfolio as a hedge in some ways against a lot of disruption that’s going to be hitting our shores."
Mr Gedeon countered the suggestion that NASDAQ-100 have high price/earnings ratios.
"The PE has been systematically declining for the last decade or so, and in the last few years it’s really been range bound between 25 and 18 depending on what’s going on in the market," Mr Gedeon said.
"But at the same time all of these companies have been increasing their earnings. Prices have been going up to respond to that increase in earnings."
The earnings growth and the revenue growth of the constituents of the NASDAQ-100 have been "significantly higher" than that of the constituents of the S&P500, Mr Vynokur said.
"And yes there is a valuation premium, but that’s quite modest to the growth in underlying revenues of the stocks. It is much very much a fundamentals story these days as opposed to a story about bubbles," he said.
"And that’s one of the reasons that people have started adopting an exposure to the NASDAQ-100. There is a lot of yield-based investing that goes on in Australia, but where do you actually buy genuine growth? Where do you get the disruptors?"
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