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5 Tech ETFs Surviving Sell-Off Induced by Rising Yields
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The technology sector has been witnessing huge volatility in recent weeks on surging yields, sparking fears of overvaluation after an astounding performance during the pandemic.
This is especially true as the sector relies on easy borrowing for superior growth and its value depends heavily on future earnings. Rise in long-term yields lower the present value of companies’ future earnings. Notably, the yields on 10-year US Treasury jumped to their highest since January 2020 at 1.75% while the 30-year yields topped 2.5% for the first time since August 2019.
The latest Fed meeting added to anxiety in the sector as it raised the forecasts for growth and inflation. The Fed lifted GDP growth projection from 4.2% to 6.5% for this year — the fastest pace since 1984. Inflation is expected to rise 2.4% this year and then slow next year to 2%. The Fed’s tolerance for faster inflation this year has triggered another wave of selling in the sector though Fed Chairman Jerome Powell viewed it to be temporary given the COVID-19 disruption in the labor market (read: Fed Bumps Up Economic Growth Forecasts: ETFs to Play).
However, the sector outlook remains solid given the global digital shift that has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping. The rapid adoption of cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence, machine learning, digital communication and 5G technology will continue to drive the sector higher.
Amid the uncertainties, a few ETFs from the sector are still surviving. We have highlighted five of these that have been in green in a month and could continue their ascent amid the tech volatility.
This ETF tracks the Reality Shares NASDAQ Blockchain Economy Index, which measures the return of companies that are committing material resources to develop, research, support, innovate or utilize blockchain technology for their use or for use by others. It holds 70 stocks in its basket with AUM of $318 million and trades in an average daily volume of 123,000 shares. The product charges 68 bps in annual fees (read: Why Blockchain ETFs Are Soaring).
Wedbush ETFMG Video Game Tech ETF (GAMR - Free Report) – Up 4.9%
This ETF offers exposure to the companies involved in the video game technology industry — game developers, console and chip manufacturers, and game retailers — by tracking the EEFund Video Game Tech Index. It holds 92 stocks in its basket and has amassed $116.4 million in its asset base. The product charges 75 bps in annual fees and trades in volume of about 58,000 shares a day on average.
First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report) – Up 0.9%
This fund provides exposure to dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $1.5 billion in its asset base and trades in a moderate volume of about 73,000 shares per day. The ETF charges 50 bps in annual fees and holds about 83 securities in its basket (read: Time to Buy These Undervalued Tech ETFs on the Dip?).
iShares North American Tech-Multimedia Networking ETF – Up 0.8%
This ETF offers exposure to telecom equipment, data networking, and wireless equipment companies by tracking the S&P North American Technology-Multimedia Networking Index. Holding 21 securities in its basket, the product has accumulated $104.7 million in its asset base while seeing a good volume of around 22,000 shares a day. It charges 46 bps in annual fees and carries a Zacks ETF Rank #2 (Buy) with a High risk outlook.
This ETF focuses on the S&P Technology Dividend Aristocrats, which are considered well-established, technology-related companies that have consistently raised their dividends for at least seven years. It follows the S&P Technology Dividend Aristocrats Index and holds 36 stocks in its basket. The fund charges 46 bps in annual fees and has AUM of $94.6 million. It trades in an average daily volume of 8,000 shares (read: 5 Market-Beating Dividend ETFs of 2020).
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5 Tech ETFs Surviving Sell-Off Induced by Rising Yields
The technology sector has been witnessing huge volatility in recent weeks on surging yields, sparking fears of overvaluation after an astounding performance during the pandemic.
This is especially true as the sector relies on easy borrowing for superior growth and its value depends heavily on future earnings. Rise in long-term yields lower the present value of companies’ future earnings. Notably, the yields on 10-year US Treasury jumped to their highest since January 2020 at 1.75% while the 30-year yields topped 2.5% for the first time since August 2019.
The latest Fed meeting added to anxiety in the sector as it raised the forecasts for growth and inflation. The Fed lifted GDP growth projection from 4.2% to 6.5% for this year — the fastest pace since 1984. Inflation is expected to rise 2.4% this year and then slow next year to 2%. The Fed’s tolerance for faster inflation this year has triggered another wave of selling in the sector though Fed Chairman Jerome Powell viewed it to be temporary given the COVID-19 disruption in the labor market (read: Fed Bumps Up Economic Growth Forecasts: ETFs to Play).
However, the sector outlook remains solid given the global digital shift that has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping. The rapid adoption of cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence, machine learning, digital communication and 5G technology will continue to drive the sector higher.
Amid the uncertainties, a few ETFs from the sector are still surviving. We have highlighted five of these that have been in green in a month and could continue their ascent amid the tech volatility.
Reality Shares Nasdaq NexGen Economy ETF (BLCN - Free Report) – Up 6.3%
This ETF tracks the Reality Shares NASDAQ Blockchain Economy Index, which measures the return of companies that are committing material resources to develop, research, support, innovate or utilize blockchain technology for their use or for use by others. It holds 70 stocks in its basket with AUM of $318 million and trades in an average daily volume of 123,000 shares. The product charges 68 bps in annual fees (read: Why Blockchain ETFs Are Soaring).
Wedbush ETFMG Video Game Tech ETF (GAMR - Free Report) – Up 4.9%
This ETF offers exposure to the companies involved in the video game technology industry — game developers, console and chip manufacturers, and game retailers — by tracking the EEFund Video Game Tech Index. It holds 92 stocks in its basket and has amassed $116.4 million in its asset base. The product charges 75 bps in annual fees and trades in volume of about 58,000 shares a day on average.
First Trust NASDAQ Technology Dividend Index Fund (TDIV - Free Report) – Up 0.9%
This fund provides exposure to dividend payers in the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $1.5 billion in its asset base and trades in a moderate volume of about 73,000 shares per day. The ETF charges 50 bps in annual fees and holds about 83 securities in its basket (read: Time to Buy These Undervalued Tech ETFs on the Dip?).
iShares North American Tech-Multimedia Networking ETF – Up 0.8%
This ETF offers exposure to telecom equipment, data networking, and wireless equipment companies by tracking the S&P North American Technology-Multimedia Networking Index. Holding 21 securities in its basket, the product has accumulated $104.7 million in its asset base while seeing a good volume of around 22,000 shares a day. It charges 46 bps in annual fees and carries a Zacks ETF Rank #2 (Buy) with a High risk outlook.
ProShares S&P Technology Dividend Aristocrats ETF (TDV - Free Report) – Up 0.2%
This ETF focuses on the S&P Technology Dividend Aristocrats, which are considered well-established, technology-related companies that have consistently raised their dividends for at least seven years. It follows the S&P Technology Dividend Aristocrats Index and holds 36 stocks in its basket. The fund charges 46 bps in annual fees and has AUM of $94.6 million. It trades in an average daily volume of 8,000 shares (read: 5 Market-Beating Dividend ETFs of 2020).
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>