In this article, we discuss 10 best metaverse ETFs to buy.
Metaverse is widely considered to be the future of the internet, where users will be able to collaborate, play games, socialize, and work in 3D spaces. Even education is expected to enter the metaverse very soon, and technology firms are actively working towards dominating the virtual world on all fronts.
The concept of metaverse exploded when Facebook, Mark Zuckerberg’s tech giant, rebranded itself to Meta Platforms, Inc. (NASDAQ:FB), in an effort to reflect its growing focus on the metaverse. Some refer to Zuckerberg as the pioneer of the metaverse concept. Following Meta Platforms, Inc. (NASDAQ:FB), industry leaders like Alphabet Inc. (NASDAQ:GOOG), Microsoft Corporation (NASDAQ:MSFT), and Snap Inc. (NYSE:SNAP) also immersed themselves into the development of virtual reality.
Development of the Metaverse
YouTube recently jumped on the metaverse bandwagon with an announcement that it is developing a game in virtual reality that is extremely interactive and offers users an immersive experience. Similarly, Microsoft acquired Activision Blizzard, Inc. (NASDAQ:ATVI), an American video game developer, as it moves to enter the metaverse domain. Snapchat is also focusing on the metaverse with its augmented reality filters and lenses that create interactive experiences. Snap’s newest focus is wearable hardware called Spectacles, which were initially normal glasses connected to a Snapchat camera, but will now enter the AR smart glasses territory.
The metaverse represents a revenue opportunity of more than $1 trillion for the companies that are diving headfirst into the space. The common elements of a metaverse include digital currency and assets, NFTs, virtual infrastructure, gaming, natural language processing, virtual social events, workplaces, online shopping, and social media. This is why companies across all spheres are making their moves to enter the metaverse. For example, JPMorgan Chase & Co. (NYSE:JPM) created a digital coin for payments using blockchain technology, and fintech leaders like PayPal Holdings, Inc. (NASDAQ:PYPL), Block, Inc. (NYSE:SQ), Visa Inc. (NYSE:V), and Mastercard Incorporated (NYSE:MA) are working towards normalizing the adoption of stable cryptocurrencies.
Investors seeking exposure to diversified metaverse stocks can look for metaverse ETFs, and invest in exchange traded funds which hold underlying companies like Block, Inc. (NYSE:SQ), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT).
Our Methodology
We selected ETFs that offer exposure to the technology, fintech, semiconductor, and gaming sectors, and their top holdings are market leaders that are set to explore and develop the metaverse.
Photo by David Dvořáček on Unsplash
Best Metaverse ETFs To Buy
10. Global X FinTech ETF (NASDAQ:FINX)
Global X FinTech ETF (NASDAQ:FINX) generally tracks the Indxx Global FinTech Thematic Index, holding companies that are leaders in the emerging financial technology sector. The underlying companies seek to digitally transform mature industries like insurance, fundraising, and third-party lending. Almost 78% of the holdings in Global X FinTech ETF (NASDAQ:FINX) are focused in the information technology sector, while 14% are concentrated in the financial industry.
One of the underlying companies in Global X FinTech ETF (NASDAQ:FINX) is Block, Inc. (NYSE:SQ), which is a financial services and digital payments firm based in San Francisco, California. Jack Dorsey, the Block, Inc. (NYSE:SQ) CEO, aims to make Bitcoin the native cryptocurrency of the internet. Bitcoin is widely referred to as the currency of the metaverse, and Block, Inc. (NYSE:SQ) is one of the top contenders in the metaverse. This makes Global X FinTech ETF (NASDAQ:FINX) one of the top metaverse ETFs to buy.
Block, Inc. (NYSE:SQ) is a popular stock among the smart money. In Q3 2021, hedge fund sentiment was bullish around Block, Inc. (NYSE:SQ), as 98 funds reported owning stakes in the company, up from 94 funds in the quarter earlier. ARK Investment Management held the biggest stake in Block, Inc. (NYSE:SQ) in the third quarter of 2021, with over 6 million shares worth $1.4 billion.
Here is what RiverPark Large Growth Fund has to say about Block, Inc. (NYSE:SQ) in its Q4 2021 investor letter:
“Block (formerly Square): Block declined on mixed quarterly results, management commentary on slowing Cash App growth, and a delay in the closing of the AfterPay acquisition (Block announced the takeover of the global “buy now, pay later” platform in August). Still, SQ reported a strong quarter overall with gross profit growth at 43% year over year (due to passthrough costs, gross profit is more reflective of top-line growth), with gross profit from its Seller Ecosystem growing 48% to $606 million and from its Cash App growing 33% to $512 million. Still, some investors focused on the weaker-than-expected gross profit growth in the company’s Cash App division, creating pressure on the company’s shares. Importantly, Adjusted EBITDA beat expectations, growing 28% to $233 million.
Through one integrated system, SQ is a hybrid of two businesses: its Seller Business (charging small and medium-sized businesses about 3% for transaction payment processing, plus other services such as instant funds access, and software for everything from customer engagement to payroll), and its Cash App (originally for person-to-person cash transfers and now a growing digital financial services provider for consumers, representing half of first quarter’s gross profit). The combined business has grown gross profit at a 37% CAGR over the past five years to $2.7 billion for 2020, and we believe that the company has an enormous long-term runway, as it has less than a 2% share of a more than $160 billion market. It is our view that the company’s Cash App (which has grown from nothing in 2015 to $512 million gross profit last quarter) has a particularly large opportunity with its powerful ecosystem of digital financial services, including digital wallets, direct deposits, stock trading, bitcoin trading, and business and tax services, which are all relatively new. The vast majority of Cash App’s more than 36 million users are younger and, importantly, are willing to replace their bank and other financial services accounts with the app. We estimate that the company can grow its gross profit more than 30% and EBITDA more than 50% annually for the foreseeable future, and while half of the company’s current profit is from its Seller Business, we believe most of Block’s future value will come from its Cash App business.”
9. ProShares UltraPro QQQ (NASDAQ:TQQQ)
ProShares UltraPro QQQ (NASDAQ:TQQQ) seeks investment results that correspond to three times the daily performance of the Nasdaq 100 Index. Around 70% of the underlying companies are concentrated in the information technology and communications services sectors. The average market cap of the ETF as of December 31, 2021 is $217.79 billion.
A notable position held by ProShares UltraPro QQQ (NASDAQ:TQQQ) is Apple Inc. (NASDAQ:AAPL), one of the most valuable multinational technology firms, providing consumer electronics, software, and online services.
Apple Inc. (NASDAQ:AAPL)’s metaverse ambitions include introducing more augmented reality apps and AR gear such as headsets and smart glasses in the near future. According to CEO Tim Cook, there is “a lot of potential in this space” and the company is “investing accordingly”, in response to a question about Apple Inc. (NASDAQ:AAPL)’s plans for the metaverse.
Apple Inc. (NASDAQ:AAPL) is one of the favorite technology stocks among smart investors. In Q3 2021, 120 hedge funds were bullish on Apple Inc. (NASDAQ:AAPL), with collective stakes amounting to $146 billion. Warren Buffett’s Berkshire Hathaway held the biggest position in the company, with more than 887 million shares worth $125.5 billion.
In addition to Block, Inc. (NYSE:SQ), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT), Apple Inc. (NASDAQ:AAPL) is a popular metaverse stock to explore.
Here is what Alger Spectra Fund has to say about Apple Inc. (NASDAQ:AAPL) in its Q4 2021 investor letter:
“Apple is a leading technology provider in telecommunications, computing and services. Apple’s iOS operating system is the company’s unique intellectual property and competitive strength. This software drives tight engagement with consumers and enterprises, fostering the growing purchases of high-margin services like music, apps and Apple Pay. Apple’s quarterly earnings exceeded street estimates on strong margin realization driven by a sales mix of more profitable services. The margin strength was even more impressive given significantly higher freight costs and supply constraints that prevented approximately $6 billion in revenue realization.”
8. SPDR S&P Software & Services ETF (NYSE:XSW)
SPDR S&P Software & Services ETF (NYSE:XSW) is an exchange traded fund that tracks the total return performance of the S&P Software & Services Select Industry Index, which represents the software and services segment of the S&P Total Market Index, an index tracking the broad U.S. equity market. As of February 16, 2022, the assets under management at SPDR S&P Software & Services ETF (NYSE:XSW) amounted to $327.29 million.
Zynga Inc. (NASDAQ:ZNGA) is the top company from the 201 holdings of SPDR S&P Software & Services ETF (NYSE:XSW). Zynga Inc. (NASDAQ:ZNGA) is a California-based company that develops social games and to dominate the metaverse. The company is taking blockchain games to the mainstream. Other significant holdings that make SPDR S&P Software & Services ETF (NYSE:XSW) a prominent metaverse ETF to look out for include Citrix Systems, Inc. (NASDAQ:CTXS), a multinational cloud computing and virtualization technology company, and Activision Blizzard, Inc. (NASDAQ:ATVI), an American video game holding company.
A total of 52 hedge funds held long positions in Zynga Inc. (NASDAQ:ZNGA) at the close of the third quarter of 2021, up from 49 funds in the quarter earlier. Diamond Hill Capital held the leading stake in Zynga Inc. (NASDAQ:ZNGA) as of Q3 2021, with 19.2 million shares worth over $145 million.
Here is what ClearBridge Mid Cap Growth Strategy has to say about Zynga Inc. (NASDAQ:ZNGA) in its Q3 2021 investor letter:
“A handful of our rapid growers hit tough earnings comparisons over the summer after experiencing a surge in demand in the second quarter of 2020 as companies moved to remote work and consumers were confined to their homes. Zynga, which develops games played on social and mobile platforms, experienced a significant uptick in new customers last year but has not seen as much retention and gaming usage as the economy has reopened.”
7. Vanguard Information Technology Index Fund ETF Shares (NYSE:VGT)
Vanguard Information Technology Index Fund ETF Shares (NYSE:VGT) is a passively managed exchange traded fund that uses a full replication strategy to mirror the Information Technology Spliced Idx, with $58.5 billion in total net assets and 360 stocks as of January 31, 2022.
One of the top holdings of Vanguard Information Technology Index Fund ETF Shares (NYSE:VGT) is Microsoft Corporation (NASDAQ:MSFT), which is one of the best multinational tech firms that is diving headfirst into the metaverse with the recent $69 billion acquisition of Activision Blizzard, Inc. (NASDAQ:ATVI), an American video game developer. The gaming company owns intellectual rights to mainstream games like Call of Duty, Guitar Hero, World of Warcraft, Diablo, Heroes of the Storm, Overwatch, and Candy Crush Saga, among others.
Elite hedge funds are extremely bullish on Microsoft Corporation (NASDAQ:MSFT). According to the Q3 database of Insider Monkey, 250 hedge funds were long Microsoft Corporation (NASDAQ:MSFT), up from 238 funds in the preceding quarter. Fisher Asset Management held the largest position in Microsoft Corporation (NASDAQ:MSFT) in Q3 2021, with 25.5 million shares worth over $7 billion.
Here is what Baron Opportunity Fund has to say about Microsoft Corporation (NASDAQ:MSFT) in its Q3 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 beating Street estimates by 4.5%, an acceleration in Commercial Cloud revenue to 31% constant-currency growth, a four-point improvement in Commercial Cloud gross margins (to 70% from 66%), and GAAP earnings up 42%. We believe the company is positioned to deliver 13% to 15% organic growth over the next three years, underpinned by TAM expansion across its disruptive cloud product portfolio, as more companies look to transform and digitize their businesses, as well as strong operating leverage as its cloud products gain scale.”
6. Fidelity MSCI Information Technology Index ETF (NYSE:FTEC)
Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) is a technology-focused ETF that tracks the performance of the MSCI USA IMI Information Technology Index, which represents the companies from the IT sector in the U.S. equity market. The top 10 holdings of Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) make up almost 65% of its total investments, which comprise 368 securities.
A top holding of Fidelity MSCI Information Technology Index ETF (NYSE:FTEC) is NVIDIA Corporation (NASDAQ:NVDA), a multinational technology company providing products and services to the semiconductor, artificial intelligence, consumer electronics, gaming, and computer hardware industries.
The metaverse depends on graphics computing technology provided by companies like NVIDIA Corporation (NASDAQ:NVDA), which is also offering free software to artists and content creators developing virtual worlds for the metaverse, in addition to making technology deals with multiple marketplaces that sell NFTs and 3D content.
Of the 83 hedge funds that were bullish on NVIDIA Corporation (NASDAQ:NVDA) in Q3 2021, Rajiv Jain’s GQG Partners held the leading stake in the company, with more than 15 million shares worth $3.13 billion.
NVIDIA Corporation (NASDAQ:NVDA) is one of the best positioned companies to explore and develop the metaverse, just like Block, Inc. (NYSE:SQ), Alphabet Inc. (NASDAQ:GOOG), and Microsoft Corporation (NASDAQ:MSFT).
Here is what Harding Loevner Global Equity Fund has to say about NVIDIA Corporation (NASDAQ:NVDA) in its Q3 2021 investor letter:
“The proliferation of devices using chips, whether EVs, “things” in lol, or embedded systems more generally, results in the generation of oceans of data potentially needing to be stored, processed, and analyzed. NVIDIA, the leading chip designer well known for its graphic processing units and its complementary CUDA software ecosystem, is at the forefront of the effort to provide the analytical platform needed to unlock the full potential of such specialist processors.”
5. Roundhill Ball Metaverse ETF (NYSE:META)
Roundhill Ball Metaverse ETF (NYSE:META) is designed to allow investors exposure to the metaverse by mirroring the performance of the Ball Metaverse Index, which consists of a portfolio of global companies that are actively involved in the metaverse. These companies belong to multiple industries including computing, networking, virtual platforms, payments, and hardware.
Roblox Corporation (NYSE:RBLX) is a major component of Roundhill Ball Metaverse ETF (NYSE:META)’s portfolio. Roblox Corporation (NYSE:RBLX) has already developed virtual worlds where millions of people socialize, play video games, and participate in the digital economy. The company is one of the best bets in the metaverse.
Roblox Corporation (NYSE:RBLX) is a popular stock among elite hedge funds. In Q3 2021, 50 funds were bullish on Roblox Corporation (NYSE:RBLX), with collective stakes amounting to $3.5 billion. Tiger Global Management was the biggest stakeholder of the company in the third quarter, with 17.4 million shares worth $1.3 billion.
Here is what Jefferies Group has to say about Roblox Corporation (NYSE:RBLX) in its Q3 2021 investor letter:
“If we look at the Metaverse concept with more lenient guidelines for interoperability, then it becomes easier to see why certain companies are being referred to as Metaverse. On the virtual side, we’d point to companies like Epic Games, TakeTwo and Roblox. In augmented reality, it would be Niantic and SNAP. These are the large capitalized players in the space but albeit, not the only ones. We expect new multi-billion dollar companies will rise as the Metaverse becomes more mature.
Roblox is a good example. The content is almost entirely user generated, the engine that powers the developer studio is provided by Roblox and developers/creators share in almost all the money that users spend on the platform. In addition, many of the items that you purchase in the avatar marketplace, or even a branded experience like Vans World, can be taken across experiences. Roblox talks a lot about platform extension, which would move the platform beyond just gaming/leisure experiences and into education and workplace offerings. The developer community has the capability to build tools for other developers, there are professional studios being built on the platform and many consumer-facing brands/content are partnering with Roblox to ensure a virtual presence. Roblox actually has a lot of the pieces for our utopian definition of Metaverse, but things like technology, interoperability with outside platforms and a dynamic, two-way economy are what’s missing. However, given our thesis that full interoperability is somewhat unrealistic, it’s easy to see how Roblox fits the definition…(click here to read the full text)
4. Evolve Metaverse ETF (TSX:MESH.TO)
Evolve Metaverse ETF (TSX:MESH.TO) is the first Canadian metaverse exchange traded fund that exposes investors to an actively managed diversified portfolio of firms that are responsible for the development of the metaverse. Evolve Metaverse ETF (TSX:MESH.TO) holds 25 securities and has assets under management of $13.362 million.
Over 90% of the companies held by Evolve Metaverse ETF (TSX:MESH.TO) belong to the information technology and communications sectors. The ETF exposes its clients to global market leaders from the United States, China, Taiwan, Japan, and Singapore.
A large holding of Evolve Metaverse ETF (TSX:MESH.TO) is Tencent Holdings Limited (OTC:TCEHY), a Chinese company that is well positioned to benefit from the metaverse. Tencent is the leading game publisher in China, as well as a prominent investor in significant gaming studios worldwide. Tencent Holdings Limited (OTC:TCEHY) is in the process of buying Black Shark, a gaming handset maker, which will invest in AR/VR headsets after the acquisition, furthering the parent company’s foray into the metaverse.
3. HORIZONS GLOBAL METAVERSE INDEX (TSX:MTAV.TO)
HORIZONS GLOBAL METAVERSE INDEX (TSX:MTAV.TO) is an exchange traded fund that seeks to replicate the performance of the Solactive Global Metaverse Index, which consists of companies that are expected to grow and support the development of the metaverse. HORIZONS GLOBAL METAVERSE INDEX (TSX:MTAV.TO) is a relatively new ETF that was listed on the Toronto Stock Exchange on November 26, 2021.
Companies in the portfolio of HORIZONS GLOBAL METAVERSE INDEX (TSX:MTAV.TO) belong to multiple industries including digital marketplaces, digital infrastructure, digital payments, creator economies, AR/VR, and gaming. One of the top holdings of HORIZONS GLOBAL METAVERSE INDEX (TSX:MTAV.TO) is Visa Inc. (NYSE:V), a fintech and payments company that headed into the metaverse with its first purchase of non-fungible tokens worth $150,000 back in August 2021.
Visa Inc. (NYSE:V) is a top stock pick of smart investors as of Q3 2021, with 143 elite funds holding combined stakes worth over $26 billion in the company. TCI Fund Management held the biggest position in Visa Inc. (NYSE:V) at the end of September 2021, with roughly 20 million shares amounting to $4.4 billion.
Here is what Weitz Investment Management, Inc. has to say about Visa Inc. (NYSE:V) in its Q4 2021 investor letter:
“Reports to investors usually focus on the winners that prove the worthiness of the managers. It’s possible that we’ve been guilty of that on occasion, despite our best efforts to accurately convey what has worked and what hasn’t. This time, though, we are going to celebrate the great businesses we own that “went nowhere” in 2021. In a generally expensive market facing potentially strong headwinds in 2022, we find it very encouraging to own a number of proven winners whose stocks have been “resting” for the last year or so. They will not necessarily save us from markdowns during broad-based corrections, but they are companies that we believe can survive and grow business value through almost anything. They are the kinds of businesses that allow us to sleep well at night and not be tempted to sell at the wrong time. Here are some examples:
Established payments companies have been out of favor recently. Cross-border payments have been depressed with COVID disrupting international travel. These types of payments are particularly lucrative for Visa and their absence has impacted earnings. Further, we believe investors have overestimated the negative competitive impact of new fintech companies that have emerged over the past few years. Many of these “disrupters” depend on the Visa “rails” over which electronic payments travel, and these wily incumbents have a way of acquiring, copying or otherwise competing with upstarts.”
2. Fount Metaverse ETF (NYSE:MTVR)
Fount Metaverse ETF (NYSE:MTVR) is an exchange traded fund that tracks an index of almost 50 companies that follow the metaverse theme. The fund was established on October 27, 2021, and has almost $13 million in assets under management as of February 16, 2022.
One of the leading stocks in Fount Metaverse ETF (NYSE:MTVR)’s portfolio is Meta Platforms, Inc. (NASDAQ:FB), a company that pioneered the vision for the metaverse. Meta Platforms, Inc. (NASDAQ:FB) is a leading tech stock among the smart investors, with 248 hedge funds holding stakes worth $38.5 billion in the company as of Q3 2021. Eagle Capital Management owned a prominent stake in Meta Platforms, Inc. (NASDAQ:FB), with more than 7 million shares valued at $2.4 billion.
Here is what Weitz Investment Management has to say about Meta Platforms, Inc. (NASDAQ:FB) in its Q4 2021 investor letter:
“A couple of other platform companies deserve a mention as well. Meta Platforms and Alphabet have both been under regulatory scrutiny that has affected their valuations. The threats of punitive action are real, but we have tried to be imaginative about how onerous any fines, rule changes or forced divestitures might be, and we believe that the five year outlook for each is well above average under almost any scenario. So, we include these two in the list of the under-appreciated.”
1. Amplify Transformational Data Sharing ETF (NYSE:BLOK)
Established in 2018, Amplify Transformational Data Sharing ETF (NYSE:BLOK) is an actively managed exchange traded fund that invests in firms that develop and utilize blockchain technologies. The ETF has 45 holdings in its portfolio.
Amplify Transformational Data Sharing ETF (NYSE:BLOK)’s largest investment is in Coinbase Global, Inc. (NASDAQ:COIN), an American company that operates a cryptocurrency exchange platform and is positioned to play a focal role in the digital economy of the metaverse.
Elite hedge funds hold significant stakes in Coinbase Global, Inc. (NASDAQ:COIN). In the third quarter of 2021, 50 hedge funds were bullish on Coinbase Global, Inc. (NASDAQ:COIN), with collective stakes amounting to roughly $3 billion. ARK Investment Management held the largest stake in the company in Q3 2021, with approximately 7 million shares worth $1.59 billion.
Here is what Hayden Capital has to say about Coinbase Global, Inc. (NASDAQ:COIN) in its Q3 2021 investor letter:
“Coinbase (COIN): We established a new position in Coinbase, the dominant US crypto exchange and brokerage, this quarter. Given the misperceptions and early-stage nature of the industry, I thought it would be helpful for our partners’ understanding to share a report outlining our thesis, which we published on October 31st.
At a high level, we believe the crypto economy is in the middle of “crossing the chasm” into mainstream adoption & use cases, which will result in millions of mainstream users needing to transact in crypto in some form.
Coinbase is well positioned in the Western, regulated markets to capture this influx – considering their dominant market share / mindshare, their focus on the casual user and thus superior user experience compared to alternatives, and their position as a “toll-booth” for this industry. Longer-term, we also believe Coinbase has “super-app” ambitions, and will be the primary gateway for both the general population and institutions to interact with the crypto economy…” (Click here to see the full text)
You can also take a look at 10 Best Semiconductor Stocks to Buy for 2022 and 10 Best Solar Energy Stocks to Buy for 2022.
Follow Insider Monkey on Twitter
Suggested articles:
- 10 Cryptocurrencies Reddit is Buying for the Next Bull Run
- 10 Best EV Battery Stocks To Invest In
- 11 Best Depressed Stocks To Invest In
Disclosure: None. 10 Best Metaverse ETFs To Buy is originally published on Insider Monkey.
