the Blockchain investment strategy of an ETF

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Amplify’s Mike Venuto runs an active exchange-traded fund that invests in companies developing blockchain technology. He shared his strategies for investing in miners, holding companies and regional banks. Insider breaks down Venuto’s top 13 under-the-radar stocks that may rise with the adoption of blockchain technologies.

When Mike Venuto started investigating bitcoin in 2015, he thought cryptocurrencies could eventually kill the entire exchange-traded fund industry.

“When I started doing some initial research, my first reaction was that this technology could replace ETFs,” the head of ETF Amplify Transformational Data Sharing (BLOK) told Insider in a recent interview. “It’s about getting rid of a bunch of trusted third parties and making things more decentralized and efficient.”

An exchange-traded fund, or ETF, follows a particular industry, strategy, or theme. BLOK actively manages approximately $1.1 billion in assets and invests at least 80% in blockchain-related stocks. It has generated annualized returns of 47% over the past three years, on par with the returns of the Dow Jones Industrial Average.

“We are building a growth portfolio – we are looking for blockchain catalysts,” Venuto told Insider. “But we’re also looking to avoid the dotcom bubble experience.”

In the early 2000s, the Nasdaq crashed nearly 80% as excessive speculation in newly listed internet companies created a stock market bubble. Venuto prides itself on identifying under-the-radar stocks that can benefit from the widespread adoption of cryptocurrencies and blockchain technology.

“There are a lot of people who are starting blockchain on their behalf but have nothing to do with blockchain,” he said. “We identify poorly funded companies, which have not put everything in place, and we feel that this active management differentiates us from our competitors.”

“To use an American football analogy, when the market goes up, it’s always easy to score touchdowns,” Venuto added. “But we’re really good at avoiding bags.”

Venuto acknowledged that crypto price movements tend to impact fund performance. Analysts are currently worried about a “crypto winter,” with bitcoin trading just above the $40,000 level, down significantly from its all-time high of $69,000 in November.

“We’ve had a really strong correlation with movements in the cryptocurrency markets, and I can’t completely take that away,” Venuto told Insider. “If we go into a crypto winter, we are going to suffer.”

“But we won’t suffer as much because we have a portfolio of companies with real profits,” he added. “A lot of our businesses actually project their revenue based on the price of bitcoin at $30,000.”

Stocks to buy

Venuto shared a list of 13 stocks with Insider, all owned by the ETF he manages. His stock picks included crypto miners and smaller regional banks.

“We are very excited about four bitcoin mining companies – they give us great exposure to bitcoin,” Venuto told Insider. “But we are also investing in an Ethereum miner as a diversifier and an environmental bitcoin mining company that listed very recently.”

“Thanks to blockchain, smaller banks are now able to do things at better rates and much faster than the big money banks,” he added. “For the first time, tiny little regional banks that have been battered for years actually have a head start on the technology used by Wells Fargo and Bank of America.”

Insider breaks down Venuto’s stock picks below. He said the 13 companies demonstrated the overall ETF BLOK investment strategy.

“We invest in companies that use blockchain as a meaningful growth catalyst,” Venuto said. “That means we’re hoping to find the next big thing.”

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