Exchange traded funds are trending on Reddit as retail investors move towards a passive method of navigating the stock market amid severe volatility. According to Morningstar, 2021 was a hot year for the passive investment sector, as passive investors accounted for about one fifth of the £8.5 trillion European investment funds market. This was a boost of 9.5% over the preceding year. Comparatively, there was a growth of only 2.1% in actively-managed investments over the period. These statistics are not surprising, since S&P Global data suggests that in a span of 15 years, about 90% of actively managed funds have underperformed their benchmarks.
Redditors are often known for their risky and daring bets in the stock market. However, even the most spontaneous of retail investors have pulled back from reckless navigation of this tumultuous market and seek out exchange traded funds that are managed by professionals to safeguard their money. Through these investments, Redditors are exposed to a mix of growth and value plays such as Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Exxon Mobil Corporation (NYSE:XOM).
Our Methodology
Best ETFs to Buy in 2022 According to Reddit
10. Invesco QQQ Trust (NASDAQ:QQQ)
Invesco QQQ Trust (NASDAQ:QQQ) is an exchange traded fund that invests in innovation, tracking the growth-heavy NASDAQ-100 Index. As of May 31, the ETF has assets under management of $166.33 billion. Its holdings comprise investments in the augmented reality, cloud computing, big data, mobile payments, streaming services, and electric vehicles sectors.
The largest stock in Invesco QQQ Trust (NASDAQ:QQQ)’s portfolio is Apple Inc. (NASDAQ:AAPL), one of the Big Five US tech giants. The Apple stake makes up 12.53% of the ETF’s total holdings. On May 25, Loop Capital analyst Ananda Baruah maintained his Buy rating and a $180 price target on Apple Inc. (NASDAQ:AAPL), noting that although he still expects an increase in the iPhone revenue for the June quarter, the projections for the September and December quarters “remain low” as the company’s average prices continue to be “materially stronger” than the Street.
Among the hedge funds tracked by Insider Monkey, 131 funds were long Apple Inc. (NASDAQ:AAPL) at the end of March 2022, compared to 134 funds in the earlier quarter. Warren Buffett’s Berkshire Hathaway held the leading stake in the company, comprising about 891 million shares worth $155.5 billion.
Here is what Berkshire Hathaway has to say about Apple Inc. (NASDAQ:AAPL) in its Q4 2021 investor letter:
“Apple Inc. (NASDAQ:AAPL) – our runner-up Giant as measured by its year end market value – is a different sort of holding. Here, our ownership is a mere 5.55%, up from 5.39% a year earlier. That increase sounds like small potatoes. But consider that each 0.1% of Apple’s 2021 earnings amounted to $100 million. We spent no Berkshire funds to gain our accretion. Apple’s repurchases did the job. It’s important to understand that only dividends from Apple are counted in the GAAP earnings Berkshire reports – and last year, Apple paid us $785 million of those. Yet our “share” of Apple’s earnings amounted to a staggering $5.6 billion. Much of what the company retained was used to repurchase Apple shares, an act we applaud. Tim Cook, Apple’s brilliant CEO, quite properly regards users of Apple products as his first love, but all of his other constituencies benefit from Tim’s managerial touch as well.”
9. Vanguard Energy Index Fund (NYSE:VDE)
Vanguard Energy Index Fund (NYSE:VDE) is a passively managed exchange traded fund that aims to replicate the performance of a benchmark index that measures the return of companies in the energy space. As of April 30, the ETF holds 102 stocks and has total net assets worth $9.8 billion. Vanguard Energy Index Fund (NYSE:VDE) has a top ten holdings concentration of 66.1%.
The largest sub-sectors that Vanguard Energy Index Fund (NYSE:VDE) invests in include integrated oil and gas, exploration and production, refining and marketing, storage and transportation, and equipment and services. The leading position in Vanguard Energy Index Fund (NYSE:VDE)’s portfolio is taken up by Exxon Mobil Corporation (NYSE:XOM), an American multinational oil and gas corporation based in Irving, Texas.
Exxon Mobil Corporation (NYSE:XOM) has consistently raised its dividends for 39 years, making it a reliable dividend aristocrat to invest in. On April 27, the company declared a quarterly dividend of $0.88 per share, in line with previous. The dividend is payable on June 10, to shareholders of the company as of May 13. Exxon Mobil Corporation (NYSE:XOM) delivered on June 1 a dividend yield of 3.60%.
According to Insider Monkey’s Q1 data, 83 hedge funds held long positions in Exxon Mobil Corporation (NYSE:XOM), compared to 71 funds in the earlier quarter. Rajiv Jain’s GQG Partners owned the leading stake in the company, with 51.80 million shares worth $4.2 billion. The hedge fund boosted its hold on Exxon Mobil Corporation (NYSE:XOM) by 60% in Q1 2022.
Here is what Goehring & Rozencwajg Associates has to say about Exxon Mobil Corporation (NYSE:XOM) in its Q3 2021 investor letter:
“After successfully replacing 25% of Exxon’s board of directors despite owning just 0.02% of the outstanding equity, Engine No. 1, the climate-focused activist hedge fund, met with Chevron’s management late last summer. In discussions that were later described as “cordial,” Chevron executives shared their plan to reduce carbon emissions. Subsequently, Chevron announced new plans to further reduce carbon output, along with their intention to appoint a new director with “environmental expertise.” Although it remains unclear exactly what Engine No. 1 is planning, rumors suggest the fund has contacted other investors, strongly suggesting they intend to launch a second campaign in the not-too-distant future.
What should Chevron expect?
It was recently reported by The Wall Street Journal that Exxon was considering abandoning two massive natural gas projects: the 75 trillion cubic foot (tcf ) Rovuma LNG project (capital cost $30 bn) and the 5 tcf Ca Voi Xanh offshore-Vietnam gas project (capital cost $10 bn). Exxon board members (most likely including the three supported by Engine No. 1) have publicly expressed concerns about both projects.
According to internal reports, these projects are among the highest CO2 producers in Exxon’s pipeline; it is no surprise these projects have been called into question. However, we find the plight of both fields to be perplexing since production would almost certainly be used to displace coal in electricity generation, cutting CO2 emissions by nearly 50%. This fact seems to be lost on the new Exxon board members.”
8. Vanguard Total Stock Market Index Fund (NYSE:VTI)
Vanguard Total Stock Market Index Fund (NYSE:VTI) tracks the performance of the CRSP US Total Market Index. Following a passively managed, index-sampling strategy, the ETF invests in large, mid, and small-cap growth and value stocks. The minimal expense ratio of 0.03% minimizes net tracking error. The top 10 holdings of Vanguard Total Stock Market Index Fund (NYSE:VTI) as of April 30 comprised 24.20% of the overall portfolio. The fund invests in 4,112 stocks, with total net assets worth $1.2 trillion.
One of the largest securities in Vanguard Total Stock Market Index Fund (NYSE:VTI)’s portfolio is Microsoft Corporation (NASDAQ:MSFT). Jefferies analyst Brent Thill on May 23 maintained a Buy recommendation on Microsoft Corporation (NASDAQ:MSFT) but slashed the price target on the shares to $325 from $400. The analyst has lowered forecasts across 28 software companies due to stiffening economic headwinds and the threat of recession. He believes his target multiples could slip further if fundamentals continue to weaken.
Among the hedge funds tracked by Insider Monkey, 259 funds were bullish on Microsoft Corporation (NASDAQ:MSFT) at the end of March 2022, compared to 262 funds in the preceding quarter. Ken Fisher’s Fisher Asset Management held the largest position in the company, comprising 27.8 million shares worth about $8.6 billion.
In addition to Apple Inc. (NASDAQ:AAPL), Amazon.com, Inc. (NASDAQ:AMZN), and Exxon Mobil Corporation (NYSE:XOM), elite investors are piling into Microsoft Corporation (NASDAQ:MSFT).
Here is what Baron Opportunity Fund has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q4 2021 investor letter:
“Shares of Microsoft Corporation, a cloud-software leader and provider of software productivity tools and infrastructure, rose during the quarter, following a strong earnings report highlighting solid demand for its broad product stack and continued momentum migrating its business to the cloud. Microsoft’s results continued to be strong across the board, with total revenue growing 20% in constant currency, beating Street estimates by 3%; an acceleration in Commercial Cloud revenue to 34% constant-currency growth; operating margins expanding to just under 45%; earnings growth of 23%; and free cash flow growth of 30%. We believe the company is positioned to deliver 13% to 15% organic growth over the next three years, underpinned by total addressable market expansion and continued market share gains across its disruptive cloud product portfolio.”
7. Vanguard S&P 500 Value Index Fund (NYSE:VOOV)
Vanguard S&P 500 Value Index Fund (NYSE:VOOV) invests in the value stocks from the S&P 500 Index. The exchange traded fund closely tracks the returns of the S&P 500 Value Index, and it is feasible for long-term investors who need to grow their money. The ETF’s investments are focused on the financials, healthcare, industrials, and consumer staples sectors. As of April 30, Vanguard S&P 500 Value Index Fund (NYSE:VOOV) holds 448 stocks in its portfolio, with total net assets of $3.1 billion. The fund has a top 10 holdings concentration of 18.10%.
A notable stock in Vanguard S&P 500 Value Index Fund (NYSE:VOOV)’s portfolio is UnitedHealth Group Incorporated (NYSE:UNH), an American diversified health care company that provides consumer-oriented health benefit plans, Medicaid plans, and health insurance, in addition to other health management solutions.
On April 14, UnitedHealth Group Incorporated (NYSE:UNH) reported its Q1 financial results, posting earnings per share of $5.49, beating market consensus estimates by $0.14. The revenue of $80.15 billion rose 14.18% year-over-year, outperforming analysts’ predictions by $1.38 billion.
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