5 stock picks with far peak inflation: 99th percentile ETF manager
- The newly launched Amplify Inflation Fighter ETF has outperformed 99% of its peers in the past three months.
- Mike Venuto, the mastermind behind the fund, has broken down his strategy and a key mistake to avoid.
- Here are five of the top stocks in the fund – and why bitcoin and gold are included.
As inflation hits 41-year highs, many investors scrambled to find hedges that could shield their portfolios from price spikes and preserve their purchasing power.
But not all investors are content to be on the defensive. Some prefer to find a way to contain inflation while remaining aggressive.
That’s why Amplify ETFs created the aptly named Amplify Inflation Fighter ETF (IWIN) and launched it on Feb. 1, just as investors grew increasingly concerned about inflation. The exchange-traded fund (ETF) is managed by sub-advisor Mike Venuto, who is the CIO and co-founder of Toroso Investments, the parent company of Tidal ETF Services.
Amplify’s Inflation Fighter ETF has beaten 99% of opposing funds in the past three months, according to Morningstar. During this period, IWIN recorded a gain of 5.5%, while the S&P 500 fell 5.4% during the same period.
While inflation is priced into the markets to some extent, investors who haven’t yet hedged their portfolios from price increases still have time to do so, Venuto said in a recent interview with Insider.
“I don’t think we’re at peak inflation,” Venuto told Insider. “And I think Wall Street’s definition of what inflation is grossly underestimates the reality of how Main Street feels.”
Venuto continued, “Wall Street uses numbers to define inflation. And they use the CPI and the PPI, and those things don’t really matter to Main Street. Main Street sees that gasoline costs two times as much and milk twice as expensive. So when they hear that the CPI is up 8%, it’s just a number that doesn’t make sense to them because it doesn’t make sense for their wallet.
Avoid This Simple Inflation Investing Mistake
Although the Amplify Inflation Fighter ETF is new and mainstream interest in inflation hedges has resurfaced for the first time in decades, Venuto said his idea for a fund like the one he manages currently dates back about 15 years.
Like many inflation-focused funds, IWIN consists of stocks and commodities that have direct or indirect links to real assets such as energy, precious metals, agriculture and land. To gain exposure to the latter group, many ETFs load up with real estate investment trusts (REITs).
But Venuto noted years ago that REITs must issue at least 90% of their profits as dividends, which are taxable at a rate of 15% in most cases, although the highest rate is 20%. This got the portfolio manager thinking about ways to find inflation hedges that don’t result in high tax payments.
structure that requires you to pass on income and give away 90% of your income – it’s not a great hedge against inflation,” Venuto said.
The best way to fight inflation
Instead of relying on REITs, Venuto said its inflation-fighting fund is built on inflation hedges that aren’t as dependent on dividends, like home builders, minorsand merchandiseincluding gold and bitcoins. REITs that are in IWIN are linked to farmland and forest landhe said.
Having a diverse group of inflation-adjacent assets is key, Venuto said, particularly because he believes there are two distinct causes of price spikes that can affect groups differently: depreciation monetary and supply shocks.
“We named the fund ‘inflation fighters’ – I need to know who my opponent is,” Venuto said.
When central banks devalue their currencies by increasing the money supply too much, physical assets like houses, metals and commodities tend to increase in value. The Venuto ETF is hedged against this risk because it holds stocks of homebuilders and miners and has exposure to real assets like gold and other rare earth metals.
But the main driver of current inflation, according to Venuto, is supply problems that have sent the prices of oil, gas and other goods skyrocketing. In addition, the Federal Reserve’s willingness to raise interest rates quickly has put an end to fears of a currency depreciation for the time being.
This is the simplest explanation for why gold only rose 2.9% in 2022 and why bitcoin – a cryptocurrency that has been compared to digital gold – fell 15%. .5% this year as inflation rises, Venuto said. But that doesn’t mean bitcoin can’t or won’t be a hedge.
“The kind of inflation that we’re experiencing that’s driving the narrative right now is supply chain shocks,” Venuto said. “This is not the debasement story. The debasement story was what we were hearing 18 months ago. If we look at bitcoin’s behavior over those 18 months, that’s enough spectacular.”
Besides bitcoin and gold, Venuto talked about five stocks that form the core of the Amplify Inflation Fighter ETF. The five stocks are below, along with the ticker, market cap, industry, and reviews, including Venuto’s opinions, for each.