A luscious apple might look very attractive; it doesn’t when Apple Inc. (AAPL - Free Report) shares are trading in the red. Does the same outlook apply to ETFs with high exposure to its stock? Time to think!
The company CEO Tim Cook might have thought of setting the stage on fire at its much-anticipated product launch event in San Francisco by showing off upgraded iPhones, a new larger iPad and a more capable Apple TV, but it poured cold water on investor sentiment.
Shares of the technology behemoth slipped nearly 2% to close at $110.15 after the two-hour presentation. This continued the bearish trend the stock has depicted since its third-quarter earnings release on Jul 21. As of yesterday’s close, shares weredown by as much as 15.4% since the release. However this morning, the stock recovered by about 2% (read: ETFs in Spotlight after Apple and Microsoft Earnings).
The revamped iPhone 6S and 6S Plus boasts a better camera, super-fast processor, new colors and the force-sensitive “3D Touch” but its outer hardware is the same as the previous model. The upgrades didn’t bring in any surprise as they are consistent with Apple’s strategy of undertaking small modifications every other year.
The new iPad, called the iPad Pro, was also not well received. The new larger version of the product is similar in size to Microsoft’s (MSFT - Free Report) Surface tablet. Further, the company’s attempt to introduce Stylus “Pencil” with the product failed to ignite consumer interest as it has already been offered by other smart phone makers in the past.
The new Apple TV set-top box introduced exciting features that have the ability to run apps allowing gaming, live sporting events and voice control Siri-enabled search. Despite this, it still has to catch up with other streaming devices such as Roku, Google’s (GOOG - Free Report) Chromecast and Amazon.com’s (AMZN - Free Report) Fire TV.
Apple Stock Still a Bet?
The movement in Apple stocks after the product launch is undoubtedly a result of “antici-pointment.” Its time to see whether the stock still holds promise.
The stock has seen strong upward movements in earnings estimates for the year, indicating analysts still value its strong fundamentals. Although it holds a Zacks Rank #3 (Hold), 60% of the analysts raised the company’s full year estimates over the last 60 days while only 30% of the analysts made downward revisions over the same time frame.
On top of this, the company’s growth prospects still look very impressive as suggested by its Zacks Growth Style Score of ‘A’ (Click here to know about Zacks Style Scores).
Apple’s projected sales growth for the full year is 27.50%, way above the industry average of 7.29%. The company boasts a return on equity of 41.46%, almost double the industry average of 22.20%. Its projected EPS growth is also robust at 41.54% compared to a negative growth of 44.20% for the industry (read: 3 Reasons to Buy Apple ETFs Despite Sell-Off).
ETFs in Focus
Investors concerned about the recent price crash can still consider Apple via the ETF or basket approach. This is because the ETF route helps investors to mitigate a company’s average performance with stellar results from others. Below we highlight three Buy-rated ETFs with heavy exposure to this tech giant for investors seeking to bet on the stock albeit at a lower risk.
iShares Dow Jones U.S. Technology ETF (IYW - Free Report)
This ETF tracks the Dow Jones US Technology Index, giving investors exposure to the broad technology space. The fund holds 138 stocks in its basket with AUM of $2.5 billion while charging 43 bps in fees and expenses. Volume is solid as it exchanges roughly 274,000 shares in hand a day. Apple occupies the top position in the basket with 19.5% of assets. Although the fund has lost nearly 2.7% in the year-to-date timeframe, it has a Zacks ETF Rank #2 (Buy) (as of Aug 9, 2015).
Select Sector SPDR Technology ETF (XLK - Free Report)
The most popular technology ETF, XLK follows the S&P Technology Select Sector Index and has $11.4 billion in AUM. This fund trades in heavy volume of more than 9 million shares and charges 15 bps in fees per year from investors. In total, the fund holds about 74 securities in its basket. Of these firms, Apple takes the top spot, making up roughly 16.4% of the assets. The fund has lost 2.8% in the year-to-date time period but has a Zacks ETF Rank #1 (Strong Buy).
Vanguard Information Technology ETF (VGT - Free Report)
This fund manages about $7.3 billion in its asset base and provides exposure to a large basket of 382 technology stocks by tracking the MSCI US Investable Market Information Technology 25/50 Index. The ETF has 0.12% in expense ratio while volume is moderate at roughly 322,000 shares. Here again, Apple is the top firm with 16.0% allocation. VGT is down 2.8% so far this year but has a Zacks ETF Rank #2 (see: all the Technology ETFs here).
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