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Top 10 Technology ETFs

| October 2, 2012 | Comments (0)

Top 10 Technology ETFs

The technology sector is where the U.S. still leads the world in product innovation and distribution. Certainly the manufacturing of final products or hardware has moved overseas but world class product design and innovation continues to take place domestically.

During the first quarter of 2012 the technology sector was leading markets higher overall. This was accentuated by Apple’s (AAPL) rapid growth and heavy weighting in many tech indexes such as QQQ and XLK. The effect of this heavy Apple weighting is especially obvious when one compares an equal-weight index to more popular market cap weighted issues (for example QTEC and QQQ noted below). Investors should note that Apple’s high weighting is a door that can swing both ways. When times are good for the company there are enhanced returns but should the stock price falter the opposite holds true.

Tech, mostly led by Apple, continued to rally through the second and third quarter of 2012. However, late in the third quarter tech-related ETFs started to show signs of fatigue and underperformance. This can be seen in the featured charts below, as prices appear to be deteriorating from recent highs.

There are currently nearly three dozen ETFs focused on the technology sector with more on the way. The following analysis features a balanced representation of the ETFs available and includes technology sub-sectors. ETFs are based on indexes tied to well-known index providers including Russell, S&P, Barclays, MSCI, and Dow Jones. Some“enhanced” indexes are also included. They attempt to achieve better performance through more active fund management than conventionally passive ETF investing.

Investors may choose an appropriate ETF from the ETFs listed below to best satisfy the need for index-based investments for their portfolios. Additionally, we’ve included leveraged long, leveraged short, and inverse ETFs for sophisticated traders and investors wishing to hedge or speculate. These ETFs are available primarily from ProShares and DirexionShares. I urge you to do your homework before engaging in these ETFs.

It’s not really fair to rank the ETFs listed below since there are choices between price or market cap weightings, enhanced or conventional indexes, as well as those targeting particular sub-sectors. They’re all quite good as far as ETF construction and are thus subject to individual choice and objective.

In my latest ebook, “” I handpick the best ETFs even further  in the US Equities space in 26 subcategories, ranging from different market capitalizations and approaches, to sector and subsector-specific ETFs, to dividend and high yield dividend ETFs. This ebook is just the first in a series that aims to help you construct a comprehensive, well-balanced portfolio of ETFs from across the wide spectrum of markets and asset classes available. The next books in the series will focus on overseas ETFs, fixed income ETFs, alternative ETFs, and portfolio construction.

A few ETFs below feature a technical view of conditions from monthly chart views. If interested in seeing current charts for these ETFs, you need look no further than by reading my blog, .  I post many of ETFs on a daily basis using daily and/or weekly charts and if looking for monthly charts, most of these are also featured within my new ebook as mentioned above.

When viewing my charts, my simple recommendation for  longer-term investors is that they stay “above” or on the “right-side” of the 12-month simple moving average (MA). When prices are above the MA, stay long, and when below, remain in cash or short. Investors more interested in a fundamental approach may not care so much about technical issues, instead preferring to buy when prices are perceived as low and sell when high, among other reasons.

At this purely fundamental strategy is not our only approach. newsletter receive added trading alerts for many of these ETFs when markets become extended. Our proprietary trading system features ETFs with weekly and daily charts, and provide investors signals as to when to exit and/or hedge open positions, or when conditions become overbought or oversold.

You will note that SMH, a popular ETF, is not included in the list below. Previously we had avoided using Merrill Lynch HOLDRS for a variety of reasons. The most important reason we did this was that HOLDRS were trusts. Constituents in the trust can only be altered through mergers, acquisition, or privatizations. This meant that weightings within the trust would get distorted, leading to undue concentration in just a few companies.

Van Eck has since acquired Merrill Lynch HOLDRS and converted them into ETFs with the approval of the shareholders and over time Van Eck will no doubt re-weight the constituents of the linked indexes. A good example of this is SMH (Van Eck Semiconductor ETF), which bears the same ticker symbol but has kept many of the components intact so as to not disrupt or upset prior investors too much. These weightings and constituents will eventually change over time. As this process continues these ETFs should become more appealing for us at ETF Digest and may prove to be even more popular in the future.

Note: Click on the charts to  enlarge.


 

PowerShares Dynamic Technology ETF ()
PTF follows the Dynamic Technology Sector Intellidex Index which is another “enhanced” index modified by quantitative methodologies. The fund was launched in October 2006. The expense ratio is 0.60%. AUM equal $30M making and average daily trading volume is less than 3K shares. As of September 30, 2012 annual dividend yield was negligible and YTD return was 13%. The 1 YR return was 25%.

Data as of September 2012
PTF Top Ten Holdings & Weightings

  • Western Digital Corporation (WDC): 2.81%
  • Seagate Technology PLC (STX): 2.77%
  • Equinix, Inc. (EQIX): 2.73%
  • KLA-Tencor Corporation (KLAC): 2.67%
  • Apple, Inc. (AAPL): 2.62%
  • Visa, Inc. (V): 2.61%
  • Maxim Integrated Products Inc. (MXIM): 2.58%
  • MasterCard Incorporated Class A (MA): 2.55%
  • Intuit, Inc. (INTU): 2.48%
  • Alliance Data Systems Corporation (ADS): 2.47%

 

First Trust Internet ETF ()
FDN follows the Dow Jones Internet Index which demands a constituent company must derive 50% of its revenues from the internet. It was launched in June 2006. The expense ratio is 0.60%. AUM is $482M and average daily trading volume is 100K shares. In our opinion this ETF provides the greatest exposure to companies in this important sector. As of September 30, 2012 annual dividend yield was negligible and YTD return 17.52%. The 1 YR return was 29.46%.

Data as of September 2012
FDN Top Ten Holdings & Weightings

  • Google, Inc. Class A (GOOG): 10.62%
  • Amazon.com Inc (AMZN): 8.04%
  • eBay Inc (EBAY): 6.61%
  • Priceline.com, Inc. (PCLN): 5.47%
  • Yahoo! Inc (YHOO): 4.31%
  • Salesforce.com, Inc. (CRM): 3.77%
  • Juniper Networks, Inc. (JNPR): 3.36%
  • Equinix, Inc. (EQIX): 3.29%
  • VeriSign, Inc. (VRSN): 3.10%
  • Akamai Technologies, Inc. (AKAM): 3.06%

 

 

 

 

 

 

 

 

 

 

 


 

iShares Software ETF ()
IGV tracks the S&P North American Technology Software Index. The fund was launched in July 2001. The expense ratio is 0.48%. AUM equal $630M and its average daily trading volume is roughly 47K shares. As of September 30, 2012 annual dividend yield was negligible and YTD return 16.75%. The 1 YR return was 21%.

Data as of September 2012
IGV Top Ten Holdings & Weightings

  • Oracle Corporation (ORCL): 9.41%
  • Microsoft Corporation (MSFT): 8.52%
  • Salesforce.com, Inc. (CRM): 7.63%
  • Intuit, Inc. (INTU): 6.54%
  • Adobe Systems Inc (ADBE): 5.91%
  • Citrix Systems, Inc. (CTXS): 5.51%
  • Symantec Corp (SYMC): 4.89%
  • Red Hat, Inc. (RHT): 4.11%
  • CA, Inc. (CA): 3.51%
  • Autodesk, Inc. (ADSK): 2.72%



 

iShares Networking ETF ()
IGN tracks the S&P North American Technology-Multimedia Networking Index. The fund was launched in July 2001. The expense ratio is 0.48%. AUM equal nearly $230M with average daily trading volume 45K shares. As of September 30, 2012 annual dividend yield was negligible and YTD return -0.60%. The 1 YR return was 8.25%.

Data as of September 2012
IGN Top Ten Holdings & Weightings

  • Cisco Systems Inc (CSCO): 9.41%
  • Qualcomm, Inc. (QCOM): 8.66%
  • Juniper Networks, Inc. (JNPR): 8.60%
  • Motorola Solutions, Inc. (MSI): 8.08%
  • F5 Networks, Inc. (FFIV): 7.85%
  • Harris Corporation (HRS): 5.00%
  • Riverbed Technology, Inc. (RVBD): 4.81%
  • Brocade Communications Systems Inc (BRCD): 4.04%
  • JDS Uniphase Corp (CA) (JDSU): 3.93%
  • Aruba Networks, Inc. (ARUN): 3.27%



 

iShares PHLX SOX Semiconductor ETF ()
SOXX tracks the popular PHLX Semiconductor Index. The fund was launched in October 2001. The expense ratio is 0.48%. AUM equal nearly $220M and average daily trading volume is 275K shares. As of September 30, 2012 the annual dividend yield was negligible and YTD return 5.50%. The 1 YR return was 13%.  ProShares and Direxion feature issues for hedging and/or speculation.

Data as of September 2012
SOXX Top Ten Holdings & Weightings

  • Applied Materials, Inc. (AMAT): 8.17%
  • Broadcom Corporation (BRCM): 8.15%
  • Taiwan Semiconductor Manufacturing ADR (TSM): 7.95%
  • Texas Instruments, Inc. (TXN): 7.57%
  • Intel Corp (INTC): 7.13%
  • SanDisk Corp (SNDK): 4.68%
  • Linear Technology (LLTC): 4.22%
  • NVIDIA Corporation (NVDA): 4.19%
  • KLA-Tencor Corporation (KLAC): 4.16%
  • Altera Corp. (ALTR): 4.15%



 

First Trust Technology AlphaDEX ETF ()
FXL follows the StrataQuant Technology Index which focuses on select technology stocks in the Russell 1000 Index. From this First Trust employs an enhanced strategy to alter the index. The fund was launched in May 2007. The expense ratio is 0.70%. AUM is $230M and average daily trading volume is 197K shares. As of September 30, 2012 annual dividend yield was negligible and YTD return was 6.88%. The 1 YR return was 17%.

Data as of September 2012
FXL Top Ten Holdings Weightings

  • Western Digital Corporation (WDC): 2.54%
  • SolarWinds, Inc. (SWI): 2.39%
  • AOL, Inc. (AOL): 2.21%
  • SanDisk Corp (SNDK): 2.19%
  • Vishay Intertechnology, Inc. (VSH): 2.04%
  • Teradyne Inc (TER): 2.04%
  • Apple, Inc. (AAPL): 2.04%
  • Arrow Electronics Inc (ARW): 2.00%
  • NCR Corporation (NCR): 2.00%
  • Avnet Inc (AVT): 1.99%



 

First Trust NASDAQ 100 Technology ETF()
QTEC follows the NASDAQ 100 Technology Sector Index, which is an equally weighted index. The fund was launched in April 2006. The expense ratio is 0.60%. AUM is $125M while average daily trading volume is 40K shares. As of September 30, 2012 annual dividend yield was .51% and YTD return 7.3%. The 1 YR return was 19%.

Most investors believe the logical alternative to QTEC is PowerShares NASDAQ 100 ETF (). It follows the NASDAQ 100 Index which includes the largest 100 nonfinancial companies listed on the NASDAQ. But it’s not a pure technology play with nearly 30% of its constituents in other sectors which, is the same for this index.

Data as of September 2012
QTEC Top Ten Holdings & Weightings

  • Seagate Technology PLC (STX): 2.88%
  • Akamai Technologies, Inc. (AKAM): 2.56%
  • Google, Inc. Class A (GOOG): 2.54%
  • SanDisk Corp (SNDK): 2.53%
  • NVIDIA Corporation (NVDA): 2.50%
  • Oracle Corporation (ORCL): 2.47%
  • Avago Technologies Ltd (AVGO): 2.46%
  • Linear Technology (LLTC): 2.45%
  • Altera Corp. (ALTR): 2.43%
  • Symantec Corp (SYMC): 2.42%



 

iShares Dow Jones U.S. Technology ETF ()
IYW follows the index of the same name. The fund was launched May 2000. The expense ratio is 0.48%. AUM is $1.8 billion and average daily trading volume is 150K shares. As of September 30, 2012 annual dividend yield was 0.65% and YTD return 19%. The 1 YR return was 29%.

Data as of September 2012
IYW Top Ten Holdings & Weightings

  • Apple, Inc. (AAPL): 24.59%
  • Microsoft Corporation (MSFT): 9.15%
  • International Business Machines Corp (IBM): 8.51%
  • Google, Inc. Class A (GOOG): 7.02%
  • Oracle Corporation (ORCL): 4.86%
  • Intel Corp (INTC): 4.47%
  • Qualcomm, Inc. (QCOM): 4.24%
  • Cisco Systems Inc (CSCO): 4.13%
  • EMC Corporation (EMC): 2.22%
  • Texas Instruments, Inc. (TXN): 1.36%



 

Vanguard Information Technology ETF ()
VGT follows the MSCI US Investable Market Information Technology 25/50 Index. The index consists of small to large companies in the broad technology space including various sectors and subsectors. The fund was launched in January 2004. The expense ratio is 0.19%. AUM equal $2.5M with average daily trading volume 145K shares. As of September 30, 2012 annual dividend yield was 0.66% and YTD return 19%. The 1 YR return was 29%.  VGT trades commission free at Vanguard.

Data as of September 2012
VGT Top Ten Holdings & Weightings

  • Apple, Inc. (AAPL): 19.05%
  • Microsoft Corporation (MSFT): 8.08%
  • International Business Machines Corp (IBM): 7.53%
  • Google, Inc. Class A (GOOG): 5.24%
  • Intel Corp (INTC): 4.66%
  • Oracle Corporation (ORCL): 4.18%
  • Qualcomm, Inc. (QCOM): 3.30%
  • Cisco Systems Inc (CSCO): 3.24%
  • Visa, Inc. (V): 2.27%
  • EMC Corporation (EMC): 1.84%



 

SPDR Technology Sector ETF ()
XLK follows the Technology Select Sector Index which breaks the S&P 500 to those companies involved in technology and relevant sub-sectors. The fund was launched December 1998. The expense ratio is 0.18%. AUM (Assets under Management) equal $10.6 billion while average daily trading volume is over 7.5M shares. As of September 30, 2012 annual dividend yield was 1.44% and YTD return 22.21%. The 1 YR return was 32%.  ProShares and Direxion offer leveraged issues for hedging and/or speculation.

Data as of September 2012
XLK Top Ten Holdings & Weightings

  • Apple, Inc. (AAPL): 20.78%
  • Microsoft Corporation (MSFT): 7.59%
  • International Business Machines Corp (IBM): 7.46%
  • AT&T Inc (T): 7.20%
  • Google, Inc. Class A (GOOG): 5.80%
  • Verizon Communications Inc (VZ): 4.09%
  • Oracle Corporation (ORCL): 4.07%
  • Qualcomm, Inc. (QCOM): 3.53%
  • Intel Corp (INTC): 3.48%
  • Cisco Systems Inc (CSCO): 3.39%



 

CONCLUSION
Technology and innovations in the sector remain a primary focus for investors. Clearly this sector will remain the leading source of innovation and economic growth in the U.S. and globally as well. As the sector expands overseas we’ll no doubt offer a review for these issues in another profile. Further, new ETFs in social media will be entering the scene for good or bad. Facebook, Zynga, LinkedIn and others have become available in the new Global X Social Media ETF (SOCL) and may become popular in the future.

New ETFs from new providers are also being issued. These may include Schwab ETFs which are issuing new ETFs with low expense ratios and commission free trading. These may also become popular as they become seasoned.

As stated with other sectors, remember ETF providers must issue ETFs and their interests aren’t necessarily aligned with yours. They have a business interest and wish to have a competitive presence in any popular sector.

For further information about portfolio structures using technical indicators visit .   You may follow us on as well and join our group conversations.  You may address any feedback to: feedback [at] etfdigest [dot] com

Source for data is from ETF sponsors and various ETF data providers.

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In his newest book, , noted market commentator and ETF expert David Fry pinpoints the best ETFs across 26 subcategories in the U.S. Equities space. He also provides a bird’s eye view of where the markets are headed, as well as insights into his proven ETF-picking methodology. The book is available from amazon.com in Kindle format.

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Category: U.S. Equities

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