5 Best Performing Technology ETFs in 2023

1. SoFi Web 3 ETF (NASDAQ:TWEB)

YTD Share Price Performance as of August 24: 59.45%

The objective of the SoFi Web 3 ETF (NASDAQ:TWEB) is to replicate the performance, prior to fees and expenses, of the SoFi Solactive ARTIS® Web 3.0 Index. The index tracks equities listed on US, developed markets, and South Korean securities exchanges. The underlying index invests in four thematic categories – Big Data & Artificial Intelligence, Blockchain Technology, Metaverse, and NFT & Tokenization. SoFi Web 3 ETF (NASDAQ:TWEB) was established on August 8, 2022. Currently, it manages $1.35 million in assets and carries an expense ratio of 0.59%. It is one of the best performing technology ETFs in 2023. 

DraftKings Inc. (NASDAQ:DKNG), an American digital sports entertainment and gaming company, is the largest holding of SoFi Web 3 ETF (NASDAQ:TWEB). On August 3, DraftKings Inc. (NASDAQ:DKNG) reported a Q2 non-GAAP EPS of $0.14 and a revenue of $875 million, outperforming market expectations by $0.28 and $112.16 million, respectively. 

According to Insider Monkey’s second quarter database, 40 hedge funds were long DraftKings Inc. (NASDAQ:DKNG), compared to 37 funds in the preceding quarter. 

Baron Discovery Fund made the following comment about DraftKings Inc. (NASDAQ:DKNG) in its Q1 2023 investor letter:

“We re-initiated a position in the former Fund holding DraftKings Inc. (NASDAQ:DKNG), a leading online sportsbook, digital casino, and daily fantasy sports operator. DraftKings’ mobile applications offer consumers the ability to wager on a wide variety of sporting events and play hundreds of real-money casino games. The company has spent the past three years building a proprietary technology stack that improves the customer experience and delivers best-in-class breadth of bet types (such as parlays, same-game parlays, and player props). State-level online sports betting (OSB) and iCasino legalization, along with a multi-year consumer adoption timeline in active states, has supported a 90% revenue growth rate for DraftKings since 2020. The opportunity for OSB legalization remains significant, with under 50% of the U.S. population currently having legal mobile sports betting. We expect 65% to 80% of the population will eventually have access to OSB. ICasino is currently legal in just seven states representing roughly 13% of the population. ICasino product adoption in legalized states has been robust, with the average user spending twice as much as a sports bettor. While the pace of legalization for iCasino has been slower, we believe additional states will pass regulation in the coming years.

As U.S. states began to legalize sports betting, the DraftKings management team moved quickly to build widespread brand awareness. DraftKings is the #2 operator in both OSB and iCasino by a wide margin, and has demonstrated improving market share trends across almost all states. When a new state legalizes sports betting, DraftKings has a first mover advantage as many of its customers are converted from the DraftKings daily fantasy sports offering. The quality of their sportsbook product along with increasingly targeted promotional spending results in strong customer retention and high lifetime values. In states where iCasino is legal, DraftKings can cross-sell OSB customers. DraftKings’ scale and product advantages are creating a flywheel that will enable the company to continue to out-invest the competition in acquisition marketing, retention, and research and development. The high barriers to entry are resulting in a consolidated industry that will eventually lead to a highly profitable business. This is evidenced by older-vintage state contribution margins that are already approaching 40%. Longer term, we believe DraftKings can generate EBITDA margins between 20% and 30% with strong free-cash-flow conversion.”

Insider Monkey focuses on uncovering the best investment ideas of hedge funds and insiders. Please subscribe to our free daily enewsletter to get the latest investment ideas from hedge funds’ investor letters by entering your email address below. You can also check out 10 Best EV Charging Stocks According to Hedge Funds and 11 Best Long-Term Penny Stocks to Buy Now.