ACDC ETF Review: Are You Ready for This Electrifying Investment?

Last Updated on 20 February 2024 by Ryan Oldnall

The Global X Battery Tech & Lithium ETF (ASX: ACDC) has experienced significant growth since its inception in August 2018. With the ETF sporting such an iconic and memorable name, ACDC, it is sure to leave a lasting impression.

Whether the ETF is named after the Australian rock band or the electrical term signifying alternating current/direct current electricity, one thing is for sure – this ETF is worth considering.

What Is The ACDC ETF?

The Global X ACDC ETF invests in companies across the entire lithium cycle, encompassing mining, refining, and battery production.

Lithium battery technology plays a pivotal role in the proliferation of electric vehicles (EVs), the storage of renewable energy, and the operation of mobile devices.

The ACDC ETF holds investments in several countries, with Japan, the USA, South Korea, Australia, and Germany making up the current top five nations in its portfolio.

ACDC ETF Chart & ACDC ETF Share Price

ACDC ETF Review - performance chart(1)

When examining the performance chart of the ACDC ETF, we can observe a significant surge in 2020, with the growth accelerating. These gains were somewhat sustained in 2021, although growth has tapered off since that time.

The gains witnessed in 2020 and 2021 can likely be attributed to the pre-inflationary conditions we are currently experiencing.

The gains witnessed in 2020 and 2021 can be attributed to the period before the current inflationary environment, as well as the infusion of extra cash into the economy during the COVID-19 pandemic, as governments aimed to stimulate their economies.

As a result, the ACDC ETF benefits from the increasing interest in consumables such as electric vehicles and other battery technologies, which rely on lithium and cobalt as their key raw materials.

ACDC ETF Share Performance

ACDC ETF Review - Annual Performance

When we analyze the annual performance of ACDC, we can observe robust results up until 2022. In 2019, during its first full year, it posted a respectable gain of 18.81%, followed by an astonishing 63.11% performance in 2020.

The year 2021 saw the ACDC ETF achieve a 20.50% gain, but performance became more mediocre from that point onward.

With a loss of -8.30%, this underscores the volatility of the markets in which the ETF operates. Remembering that the ACDC ETF invests in companies throughout the lithium cycle, including mining, refinement, and battery production.

With such a sector spread, the ETF’s overall performance is significantly influenced by the individual performances of each company, as well as their respective weightings within the ETF, a topic we will delve into later on.

ACDC ETF Review - Average Return

When we analyze the average performance figures, the current 3-year and 5-year averages show strong results for the ACDC ETF.

Over the past 3 years, the ETF has delivered an average return of 13.63%, and over the past 5 years, it has achieved an average return of 15.61%.

The ETF’s three-year average returns are slightly lower than the 3-year returns of the US S&P 500, which achieved gains of 14.32% during the same period.

However, the ACDC ETF performed better than the S&P 500 in the five-year category, with returns of 14.07% compared to the S&P 500’s 5-year returns of 14.07% [1].

Additionally, the ACDC ETF has surpassed the performance of the Australian S&P/ASX 200, which reported a 3-year return of 9.09% and a 5-year return of 7.73% [2].

ACDC ETF Dividend

ACDC ETF Review - Table Comparison

The ACDC ETF’s dividend yield is presently at 3.13%, and its annual distribution amounts to $3.49. It’s important to highlight that the ACDC ETF currently manages approximately $533.6 million in assets and holds 32 equities.

In terms of expenses, the ETF management costs are relatively higher at 0.69%. This is in contrast to your typical index-tracking funds like VAS, which charges 0.07%, or IVV, which charges 0.04%.

ACDC ETF Holdings

ACDC ETF Review - Top 10 Holdings

As discussed previously, the overall performance of the ETF is heavily influenced by the individual performances of the companies within its portfolio. Tesla, as we all know, has experienced significant fluctuations in its financial results over time.

The cyclical nature of Tesla’s business implies that as consumer interest increases, so do its profits. I have previously examined Tesla’s share performance, and it has surged by 103.48% year-to-date (YTD), with the stock doubling in value since the beginning of the year [3].

When we look at the top 10 holdings, some companies are well-known household names, while others may be less familiar.

In this context, Tesla holds the highest allocation at 5.32%, followed by TDK Corp with a 4.68% allocation. TDK Corp is a Japanese multinational electronics company that manufactures electronic components, recording, and data storage media.

ACDC ETF Review - Top 10 As percentage of whole ETF

When you express the top 10 holdings as a total percentage of the entire ETF, they make up approximately 43.97%.

While this might seem like a substantial portion, it’s important to consider that the ACDC ETF currently holds only 32 equities. In this context, having the top 10 holdings account for this percentage is quite reasonable.

In contrast, when we reviewed IVV vs VGS, we noticed that VGS, with over 1455 companies within its portfolio, had its top 10 holdings accounting for 30.98% of the total ETF.

This observation reinforces the point that the overall performance of the ETF can be significantly influenced by a relatively small number of companies when there are fewer equities in the portfolio.

Summary – Is ACDC ETF A Good Investment

The ACDC ETF offers a distinctive investment opportunity that carries a higher level of risk in comparison to an index-tracking ETF.

While all investments inherently entail some degree of risk, this particular ETF is directly tied to the performance of companies within the lithium cycle.

The concept of the “lithium cycle” is a broad one, but it essentially revolves around lithium as its central component. So, if you have confidence in the future of batteries, electric vehicles (EVs), and related technologies, this ETF could complement your investment strategy.

Nevertheless, it’s essential to recognize that this ETF is likely better suited as a tilt in your investment portfolio rather than that of your core.

By using it as a tilt element, your primary investments would remain less susceptible to the cyclical and manufacturing-driven dynamics of this specialised sector.

  1. ,

This article does not serve as an endorsement or recommendation for products mentioned in the article. The information presented here is based on referenced sources and is accurate as of the date of November 5, 2023. Please note that these articles can be written sometime before their publication date.

The information provided in this content is for informational purposes only and should not be considered as financial, investment, or professional advice. We recommend consulting with a qualified expert or conducting your own research before making any financial decisions.

The accuracy, completeness, or reliability of the information cannot be guaranteed, and the provider shall not be held responsible for any actions taken based on the information contained in this content.


Similar Posts