Hedge funds have always been closely watched for cues on investment opportunities. Although their strategies can be complex, understanding the trends they're bullish on can offer important insights for retail investors.

Siddharth Singhai, CIO of value-based global hedge fund IronHold Capital, recently shared his perspective on sectors worth watching, and how ETFs can help investors capitalize on these themes.

From automobiles and homebuilding to mining and AI, here are some ETFs based on his insights:

Automobile Industry On Third Gear

One area drawing attention is the U.S. auto industry. With protectionist policies likely to intensify under the Trump administration, automakers such as General Motors Co GM, Ford Motor Co F, and Stellantis NV STLA stand to benefit significantly, according to Singhai.

Possible tariffs on Chinese electric vehicles could set the playing field for these companies, making the U.S. auto sector one to keep a close eye on.

“We do anticipate a clear protectionism policy in place for U.S. auto, specifically the big three: General Motors, Ford and Stellantis. Simply because if the tariffs were not put in place against Chinese EVs, U.S. automakers would be at about a 30% to 40% cost disadvantage, which would essentially mean the end of U.S. auto as we know it,” said Singhai.

However, as a word of caution, he said that one should be wary of auto companies that might face trouble in the face of EV revolution.

“We believe U.S. autos and U.S. auto parts suppliers, who have been hit badly due to the excess inventories prevailing in the U.S. auto industry in general, could be a good hunting ground, potentially. Although investors should be focused on auto suppliers that are probably not going to get disrupted by the EV transition,” Singhai said.

For investors, ETFs like the First Trust S-Network Future Vehicles & Tech CARZ offer exposure to the expected surge in domestic automotive manufacturing. The ETF has an expense ratio of 0.7% and among its holdings are Tesla, Inc. TSLA, Ford, General Motors and Stellantis.

Home Building Industry In Focus

Homebuilders are another promising area, according to Singhai. Despite overvaluation concerns in the equity market, the housing sector continues to experience a significant supply-demand imbalance. Years of undersupply following the 2008 financial crisis created the opportunity for select homebuilding companies to thrive.

“U.S. market is extremely overvalued at the moment, and there are not that many sectors that could be happy hunting grounds for hedge funds or value investors like us. In general, homebuilders, some of them, seem to be still attractively positioned given the great imbalance between supply and demand, mainly because of years of undersupply post-Great Recession in 2008-’09. So we believe homebuilders, some of them, present very compelling opportunities,” Singhai noted.

Investors interested in this space might consider ETFs such as the iShares U.S. Home Construction ETF ITB, which focuses on leading players in the sector, such as Builders Firstsource, Inc. BLDR and Lowes Companies, Inc. LOW. The expense ratio that this ETF carries is 0.39%.

Mining — Hidden Gems To Look For

Mining is another area that stands out. Many companies in this space, especially low-cost producers, are undervalued and largely overlooked by the market. These firms could see strong performance with a rebound in global demand for raw materials.

“Mining companies also seem to be hit badly and ignored by investors. You could find some really good mining companies that are the lowest cost producers in their respective industries that could prove to be high performers over the next two to three years,” Singhai noted from his expertise.

ETFs such as the SPDR S&P Metals and Mining ETF XME invest in a range of mining companies and could be a good fit for investors looking to capture growth in this area. The ETF carries an expense ratio of 0.35% and holdings in Hecla Mining Co HL and Reliance Inc. RS, among others.

AI Trends To Watch

Singhai also touched upon the continued interest in semiconductors and AI. While these industries are undeniably buzzing, he warns against impulsive investing. Many companies in this space are trading at lofty valuations that may not be sustainable.

“I do foresee a lot of hedge funds diving right into semiconductors and AI stocks. I also believe more retail investors will seriously consider allocating capital to this particular sector moving forward as well. However, it is ripe with extreme bubble-like valuations. The marquee names in the AI industry are trading for as high as 20 to 50 times revenue, which to us seems excessive even given the promise of AI,” he said.

Singhai also added, “Not all AI companies can capture 50% of the market or even 30% of the market, and if they fail to do so, they cannot foreseeably justify their current valuations. This leads us to the ultimate conclusion that there will be a few big winners and many, many losers within the industry. As such, most AI companies do not deserve their expensive, hefty valuations.”

For those interested in exploring the AI-driven growth story, a diversified ETF like the VanEck Semiconductor ETF SMH offers exposure to leading players like NVDIA Corp NVDA and Broadcom Inc AVGO while mitigating the risks of betting on individual stocks. And the cost of investing in this ETF is also reasonable at 0.35%.

All that said, Singhai emphasized the route of ETFs should be seen as tools for diversification and steady returns — not as a shortcut to mimicking hedge fund performance. It will be wise for retail investors to focus on sectors with solid fundamentals rather than on speculative trends.

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