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Technology stocks have driven U.S. equity market gains over the past two years, but how advisors and investors are looking to capture technology trends in 2025 is likely to change.
The risks of the volatile Trump administration aside, the U.S. is still a place in which equity investors want to position their capital to reap the benefits of the tech sector. It’s one that’s likely to continue to grow this year, although maybe a little less than in previous years, says James Learmonth, portfolio manager with Harvest ETFs in Oakville, Ont.
“The Magnificent Seven stocks that led the market the past two years are poised to see a slowdown in earnings per share growth,” he says. “Juxtaposing against that, we expect earnings growth to accelerate for the rest of the market, reflecting broader economic growth.”
Although some of that growth will come from other sectors, tech remains a major theme for investors. A more innovative approach can add resiliency to portfolios with that exposure.
One emerging choice for advisors and do-it-yourself investors is single stock exchange-traded funds that employ covered call overlays, and even light leverage, to generate monthly high cash distributions.
Harvest ETFs is a leader in this space, having launched Harvest Microsoft Enhanced High Income Shares ETF MSHE-T, Harvest Amazon Enhanced High Income Shares ETF AMHE-T, Harvest NVIDIA Enhanced High Income Shares ETF NVHE-T and Harvest Eli Lilly Enhanced High Income Shares ETF LLHE-T in 2024.
This January, Harvest announced six new single-stock ETFs, expanding on its Harvest High Income Shares lineup to broaden technology exposure. These include:
- Harvest MicroStrategy High Income Shares ETF MSTY-T;
- Harvest Coinbase High Income Shares ETF CONY-T;
- Harvest Palantir Enhanced High Income Shares ETF PLTE-T;
- Harvest Tesla Enhanced High Income Shares ETF TSLY-T;
- Harvest Meta Enhanced High Income Shares ETF METE-T; and
- Harvest Diversified High Income Shares ETF HHIS-T, an equal-weighted portfolio of all five single-stock ETFs.
The offerings include names that are atop key trends and are poised to continue to thrive in 2025, representing areas and themes with enormous promise.
For example, Harvest Palantir Enhanced High Income Shares ETF invests in one of the best performing stocks in recent months. Palantir is involved in software platforms for big data analytics. It has surged because of the boom in artificial intelligence, major U.S. government contracts, and commercial growth in health care, finance, energy and product innovation. These remain significant growth tailwinds.
Harvest MicroStrategy High Income Shares ETF and Harvest Coinbase High Income Shares ETF provide exposure to cryptocurrency. That’s another recent growth theme because of crypto acceptance and trading volumes, institutional adoption and decentralized finance integrations. Bitcoin and other cryptocurrencies should also benefit from a U.S. administration that’s expected to implement favourable regulation, Mr. Learmonth says.
“The U.S. clearly has prioritized investing in technology to ensure it remains a global leader.”
To that end, he notes Meta and Tesla have built strong ties with the Trump administration that could also fuel growth for these stocks.
The new ETFs involve 25 per cent leverage on the portfolio and covered calls written on as much as 50 per cent of holdings. Like Harvest’s previous lineup of single-stock ETFs, they offer high-yielding income, paid as monthly distributions.
Two exceptions are the Coinbase and MicroStrategy ETFs, which only employ a covered-call overlay. The remaining names also have versions without the leverage strategy, Mr. Learmonth says.
“It’s really about the opportunity to get exposure to these stocks, but at the same time, generate significant monthly cash flow – much higher than you’d get just owning the stocks.”
Although covered calls limit upside, investors still get growth, and the volatility tends to favour this strategy, Mr. Learmonth says.
Harvest ETFs’ approach offers Canadian investors a way to combine desired exposure, some tax efficiency (through a Canadian trust format as an ETF), consistent monthly income and a high upside with the covered-call strategy.
“The ability to maintain some of that exposure, while clipping a monthly cash distribution, is an interesting way to have these growth themes in your portfolio for 2025,” Mr. Learmonth says.
Advertising feature produced by Globe Content Studio with Harvest ETFs. The Globe’s editorial department was not involved.