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Most of the sectors have been shining this year on proposed Trump policies and stronger earnings and, technology is no exception. In fact, almost every corner of the tech sector is delivering robust performances pushing the stocks higher (read: Will Trump's New Policies Hurt These Sector ETFs & Stocks?).
Behind the Surge
Most of the gains came from a string of better-than-expected Q4 results from heavyweights such as Intel (INTC - Free Report) , International Business Machines (IBM - Free Report) , Netflix (NFLX - Free Report) , Microsoft (MSFT - Free Report) , Apple (AAPL - Free Report) and Facebook that have injected a strong momentum into the entire sector, pushing many stocks to fresh highs.
Additionally, a strengthening economy and better job prospects gave a solid boost to economically sensitive growth sectors like technology that typically perform well in a maturing economic cycle. Consolidation, increasing consumer spending and rising consumer confidence added to the strength. Particularly, global IT spending is expected to increase 2.7% to $3.5 trillion this year, according to Gartner while Forrester projects spending to grow 3-4%.
In the current emerging digital world, demand for advanced technologies such as cloud computing, big data, smartphones, high-speed fiber networks and the Internet of Things is growing by leaps and bounds. The adoption of innovative products such as wearables, VR headsets, drones, and virtual reality devices are fast becoming technology staples for savvy Americans. This is creating great opportunities for tech companies.
Not to forget, most of these tech companies are sitting on a huge cash pile and are in a position to increase payouts to their shareholders. The cash reserves will ensure that these companies are not plagued by financial trouble in a rising interest rate environment.
Further, Trump’s proposed corporate tax reform, that could allow companies to bring back cash being held overseas at lower rates, is good for tech companies though his protectionist rhetoric including crackdown on immigration and travel ban is weighing on the sector (read: Top ETF Stories of January 2017).
Moreover, the upside in this corner of the space could be confirmed by the Zacks Sector Rank in the top 38% at the time of writing, suggesting solid growth prospects in the coming months.
Given this, tech ETFs have been hitting all-time high levels in recent trading sessions. While the ascent has spread to most corners of the space, we have highlighted one fund from each corner. Any of the following could be a solid pick for investors to ride out the surge in the space.
The fund offers global exposure to the companies engaged in the cyber security segment of the technology and industrials sectors by tracking the Nasdaq CTA Cybersecurity Index. In total, the product holds 30 stocks in its basket with none accounting for more than 7.2% of the portfolio. It is skewed toward the software industry at 55.4% while communications equipment round off the next spot with a double-digit allocation. American firms account for 72% of CIBR while the Netherlands, Israel, United Kingdom and many others make up for a single-digit allocation. This ETF has accumulated $165.8 million in its asset base and charges 60 bps in annual fees. It trades in a light average daily volume of around 53,000 shares and surged to new one-year high of $21.22 per share, representing 8.7% gains so far this year (read: Will Cybersecurity ETFs Surge in 2017?).
PowerShares Dynamic Semiconductors Fund (PSI - Free Report)
The product, with AUM of $130 million and average daily volume of around 48,000 shares, hit fresh high of $39.44 per share, representing a gain of about 9.3% so far this year. This ETF tracks the Dynamic Semiconductor Intellidex Index, which selects stocks on a variety of investment criteria: price momentum, earnings momentum, quality, management action and value. In total, the fund holds a basket of 30 securities with each holding less than 5.7% share. The product charges a fee of 63 bps a year and has a Zacks ETF Rank of 2 with a High risk outlook.
This fund provides exposure to a large basket of 366 technology stocks by tracking the MSCI US Investable Market Information Technology 25/50 Index. It is highly concentrated on the top three firms accounting for double-digit exposure each, while other firms hold not more than 5.7% of assets. The product is well spread out across a number of industries with Internet software & services, technology hardware & storage, system software, semiconductors and data processing & outsourced services, each accounting for a double-digit allocation each. It manages about $10.3 billion in its asset base and has 0.10% in expense ratio. Volume is good at nearly 446,000 shares. The fund gained 6.5% in the year-to-date timeframe and hit all-time high of $129.37 per share in recent session. It has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook (see: all the Technology ETFs here).
This fund provides exposure to the cloud computing securities by tracking the ISE Cloud Computing Index. Holding about 30 stocks, it is pretty well spread out across components with none holding more than 5.1% of assets. Software firms dominate this ETF, accounting for 39% share, while Internet software services (14.9%) and communication equipment (13.9%) round off to the next two spots. The product has amassed $686.3 million in AUM and sees good volume of about 104,000 shares a day. It has 0.60% in expense ratio and gained 7.4% so far this year. It soared to all-time high of $37.03 per share and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook.
iShares North American Tech-Multimedia Networking ETF
This ETF provides a concentrated exposure to the domestic multimedia networking securities by tracking the S&P North American Technology-Multimedia Networking Index. Holding 25 securities in its basket, the fund has a moderate concentration with each holding not more than 9.7% of assets. The product has accumulated $76.3 million in its asset base while sees a lower volume of around 48,000 shares a day. Expense ratio comes in at 0.47%. The fund has gained 2.6% in the year-to-date timeframe and hit an all-time high of $44.77 per share. It has a Zacks ETF Rank of 2 with a High risk outlook (read: What Tech Crash? These ETFs are Still Top Picks).
iShares North American Tech-Software ETF (IGV - Free Report)
This ETF provides exposure to the software segment of the broader U.S. technology space by tracking the S&P North American Technology-Software Index. The fund holds a basket of 56 securities with each holding less than 9% share. It is quite popular with AUM of $680.1 million, while average daily volume is nearly 195,000 shares. The product charges 47 bps in annual fees and hit new high of $118.62 per share. It has gained 9% so far this year and carries a Zacks ETF Rank of 3 with a High risk outlook.
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Technology ETFs Hitting All-Time High
Most of the sectors have been shining this year on proposed Trump policies and stronger earnings and, technology is no exception. In fact, almost every corner of the tech sector is delivering robust performances pushing the stocks higher (read: Will Trump's New Policies Hurt These Sector ETFs & Stocks?).
Behind the Surge
Most of the gains came from a string of better-than-expected Q4 results from heavyweights such as Intel (INTC - Free Report) , International Business Machines (IBM - Free Report) , Netflix (NFLX - Free Report) , Microsoft (MSFT - Free Report) , Apple (AAPL - Free Report) and Facebook that have injected a strong momentum into the entire sector, pushing many stocks to fresh highs.
Additionally, a strengthening economy and better job prospects gave a solid boost to economically sensitive growth sectors like technology that typically perform well in a maturing economic cycle. Consolidation, increasing consumer spending and rising consumer confidence added to the strength. Particularly, global IT spending is expected to increase 2.7% to $3.5 trillion this year, according to Gartner while Forrester projects spending to grow 3-4%.
In the current emerging digital world, demand for advanced technologies such as cloud computing, big data, smartphones, high-speed fiber networks and the Internet of Things is growing by leaps and bounds. The adoption of innovative products such as wearables, VR headsets, drones, and virtual reality devices are fast becoming technology staples for savvy Americans. This is creating great opportunities for tech companies.
Not to forget, most of these tech companies are sitting on a huge cash pile and are in a position to increase payouts to their shareholders. The cash reserves will ensure that these companies are not plagued by financial trouble in a rising interest rate environment.
Further, Trump’s proposed corporate tax reform, that could allow companies to bring back cash being held overseas at lower rates, is good for tech companies though his protectionist rhetoric including crackdown on immigration and travel ban is weighing on the sector (read: Top ETF Stories of January 2017).
Moreover, the upside in this corner of the space could be confirmed by the Zacks Sector Rank in the top 38% at the time of writing, suggesting solid growth prospects in the coming months.
Given this, tech ETFs have been hitting all-time high levels in recent trading sessions. While the ascent has spread to most corners of the space, we have highlighted one fund from each corner. Any of the following could be a solid pick for investors to ride out the surge in the space.
First Trust Nasdaq Cybersecurity ETF (CIBR - Free Report)
The fund offers global exposure to the companies engaged in the cyber security segment of the technology and industrials sectors by tracking the Nasdaq CTA Cybersecurity Index. In total, the product holds 30 stocks in its basket with none accounting for more than 7.2% of the portfolio. It is skewed toward the software industry at 55.4% while communications equipment round off the next spot with a double-digit allocation. American firms account for 72% of CIBR while the Netherlands, Israel, United Kingdom and many others make up for a single-digit allocation. This ETF has accumulated $165.8 million in its asset base and charges 60 bps in annual fees. It trades in a light average daily volume of around 53,000 shares and surged to new one-year high of $21.22 per share, representing 8.7% gains so far this year (read: Will Cybersecurity ETFs Surge in 2017?).
PowerShares Dynamic Semiconductors Fund (PSI - Free Report)
The product, with AUM of $130 million and average daily volume of around 48,000 shares, hit fresh high of $39.44 per share, representing a gain of about 9.3% so far this year. This ETF tracks the Dynamic Semiconductor Intellidex Index, which selects stocks on a variety of investment criteria: price momentum, earnings momentum, quality, management action and value. In total, the fund holds a basket of 30 securities with each holding less than 5.7% share. The product charges a fee of 63 bps a year and has a Zacks ETF Rank of 2 with a High risk outlook.
Vanguard Information Technology ETF (VGT - Free Report)
This fund provides exposure to a large basket of 366 technology stocks by tracking the MSCI US Investable Market Information Technology 25/50 Index. It is highly concentrated on the top three firms accounting for double-digit exposure each, while other firms hold not more than 5.7% of assets. The product is well spread out across a number of industries with Internet software & services, technology hardware & storage, system software, semiconductors and data processing & outsourced services, each accounting for a double-digit allocation each. It manages about $10.3 billion in its asset base and has 0.10% in expense ratio. Volume is good at nearly 446,000 shares. The fund gained 6.5% in the year-to-date timeframe and hit all-time high of $129.37 per share in recent session. It has a Zacks ETF Rank of 2 or ‘Buy’ rating with a Medium risk outlook (see: all the Technology ETFs here).
First Trust Cloud Computing ETF (SKYY - Free Report)
This fund provides exposure to the cloud computing securities by tracking the ISE Cloud Computing Index. Holding about 30 stocks, it is pretty well spread out across components with none holding more than 5.1% of assets. Software firms dominate this ETF, accounting for 39% share, while Internet software services (14.9%) and communication equipment (13.9%) round off to the next two spots. The product has amassed $686.3 million in AUM and sees good volume of about 104,000 shares a day. It has 0.60% in expense ratio and gained 7.4% so far this year. It soared to all-time high of $37.03 per share and has a Zacks ETF Rank of 3 or ‘Hold’ rating with a Medium risk outlook.
iShares North American Tech-Multimedia Networking ETF
This ETF provides a concentrated exposure to the domestic multimedia networking securities by tracking the S&P North American Technology-Multimedia Networking Index. Holding 25 securities in its basket, the fund has a moderate concentration with each holding not more than 9.7% of assets. The product has accumulated $76.3 million in its asset base while sees a lower volume of around 48,000 shares a day. Expense ratio comes in at 0.47%. The fund has gained 2.6% in the year-to-date timeframe and hit an all-time high of $44.77 per share. It has a Zacks ETF Rank of 2 with a High risk outlook (read: What Tech Crash? These ETFs are Still Top Picks).
iShares North American Tech-Software ETF (IGV - Free Report)
This ETF provides exposure to the software segment of the broader U.S. technology space by tracking the S&P North American Technology-Software Index. The fund holds a basket of 56 securities with each holding less than 9% share. It is quite popular with AUM of $680.1 million, while average daily volume is nearly 195,000 shares. The product charges 47 bps in annual fees and hit new high of $118.62 per share. It has gained 9% so far this year and carries a Zacks ETF Rank of 3 with a High risk outlook.
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 >>