Analyst Recommends These ETFs To Play 3 Key Themes For 2021 — EVs, Cannabis, And COVID-19 Recovery

There are going to be three key themes for the coming year, 2021, which will make some ETFs very attractive — something investors should keep an eye on — as per Ned Davis Research’s Senior Portfolio Strategist Pat Tschosik.

Cannabis sector under the Democratic President-elect Joe Biden, the impact of Covid-19 vaccine manufacturing and distribution, and the electric vehicles segment are expected to emerge as the key themes for 2021, Tschosik said, as reported by CNBC.

Legalized Cannabis Under Joe Biden’s Term: Tschosik believes that with the Democratic party at the helm of affairs, cannabis stocks may witness significant tailwinds in 2021. During the elections, four states, namely New Jersey, Arizona, South Dakota, and Montana legalized the possession and use of marijuana.

The Ned Davis Research’s strategist opines that furthering cannabis legalization on a nationwide level will not only be seen as a progressive agenda of the party but also generate a new model for tax collections on a state level.

The analyst recommends buying Global X Cannabis ETF POTX, which has gained 44.76% since the election day, and iShares US Healthcare Providers ETF IHF — up 10% in the same period, to gain exposure to the sector.

Since Nov. 3, Canopy Growth Corp CGC stock is up 39.7%, Aurora Cannabis Inc ACB by 122%, and Tilray Inc TLRY by 30%.

Impact of COVID-19 Vaccine: The news of multiple successful vaccine candidates is spurring hawkish market sentiments. These sentiments are not just restricted to healthcare companies, but also other businesses like retail stores, amusement parks, cinema halls, travel, and tourism, that suffered during the lockdown.

Stocks of travel and leisure companies are set for a rebound next year and Ned Davis Research strategist believes that Invesco Dynamic Leisure & Entertainment ETF PEJ and US Global Jets ETF JETS provide key exposure to the sector. Both the ETF's have dropped this year, with PEJ by 15% and JETS by 26%. 

Movie theatre chain AMC Entertainment Holdings Inc AMC stock is up 50% since Nov. 3 and Walt Disney Company DIS by 24%. Airliner United Airlines Holdings Inc UAL has risen 44% since the election day. Vacation rental booking company Airbnb Inc is also reportedly targeting a valuation of up to $42 billion in its upscaled IPO amid high demand.

Electric Vehicles, Renewable Energy Sources: Tschosik believes that the next year could be marked by a systematic growth in the electric vehicles and clean energy segment, CNBC reports. “Clean energy momentum could continue for decades given the backing from both governments and private industry,” as per the analyst.

The senior strategist lists two promising ETFs - the First Trust NASDAQ Clean Edge Green Energy QCLN and Global X Autonomous & Electric Vehicles ETF DRIV as buys for exposure to the sector. On a year-to-date basis, QCLN has gained close to 142% and DRIV by approximately 51%.

EV market leader Tesla Inc’s TSLA stock has jumped close to 600% since the beginning of the year. The stock rallied stronger in the second half of August and then in the second half of November.

Many Chinese EV companies raised funds from IPO listings in the U.S this year. Xpeng Inc XPEV, an EV company backed by Chinese tech giant Alibaba Group Holdings BABA, generated $1.5 billion from the IPO in late August. Li Auto Inc LI secured $1.1 billion from the IPO offering in July.