Though rounds of tariff threats have kept market returns at check, signals indicating that United States and China are willing to restart their trade talks have resumed the Wall Street rally. In particular, the tech-heavy Nasdaq hit a record on the technology surge powered by Facebook (FB - Free Report) , Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) . A rising interest rate scenario and solid demand for cutting-edge technology have been acting as major catalysts.
The index has outperformed the other major large cap indices by a wide margin on a year-to-date basis, having gained 13.3% (read: 3 Tech ETFs Upgraded to Top Rank Amid Trade Fears).
The renewed optimism can also be attributed to the high hopes for Q2 earnings. Earnings for the S&P 500 index are expected to grow 19.1% from the same period last year on 8.2% higher revenues. This would be the third consecutive quarter of double-digit earnings growth, a trend that is currently expected to continue in the second half of the year. A strong economy and historic tax cuts will continue to drive earnings higher. Per Thomson Reuters, S&P 500 companies are expected to post second-quarter profit growth of around 21%.
The tech sector is expected to be the fifth largest contributor to Q2 earnings growth, contributing 23.8%. Further, rounds of upbeat data signaling improving economic growth have added to the bullish outlook for stocks.
While winners are spread across many corners of the tech space, most of them have generated incredible returns so far this year and have easily crushed the Nasdaq. As a result, we have highlighted the five best performing ETFs and stocks in the space that have hit new highs in the latest trading session and are expected to outperform in the months ahead, given their Zacks Rank #1 (Strong Buy) or 2 (Buy).
First Trust Dow Jones Internet Index Fund (FDN - Free Report) – Up 32.9%
This fund targets the Internet corner of the broad technology space with AUM of $9.3 billion and average daily volume of around 642,000 shares. The fund follows the Dow Jones Internet Composite Index and holds 42 stocks in its basket. Expense ratio comes in at 0.53%. The fund has a Zacks ETF Rank #1 (read: These Sector ETFs Are Set to Sizzle on Earnings).
iShares North American Tech-Software ETF (IGV - Free Report) – Up 26.9%
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. Holding a basket of 64 securities, the fund charges 48 bps in annual fees and has AUM of $1.9 billion. Volume is good as it exchanges nearly 241,000 shares a day. IGV has a Zacks ETF Rank #2.
SPDR S&P Software & Services ETF (XSW - Free Report) – Up 24.4%
This fund also targets the software and services segment and follows the S&P Software & Services Select Industry Index. It holds 127 stocks in its basket, charging 35 bps in annual fees. XSW has accumulated $93 million and trades in paltry volume of 8,000 shares a day on average. It has a Zacks ETF Rank #2.
First Trust Cloud Computing ETF SKYY – Up 23.1%
This fund provides exposure to 30 cloud computing securities by tracking the ISE Cloud Computing Index. It has amassed $1.7 billion in its asset base and sees a good volume of about 292,000 shares a day. It charges 60 bps in annual fees and a Zacks ETF Rank #2 (read: Tech ETFs Scaling New Highs on Surging FANG Stocks).
iShares North American Tech ETF (IGM - Free Report) – Up 20.4%
This ETF tracks the S&P North American Technology Sector Index, giving investors exposure to 297 electronics, computer software and hardware, and informational technology companies. The fund has AUM of $1.5 billion and charges 48 bps in annual fees. It trades in a moderate volume of nearly 53,000 shares in hand a day and has a Zacks ETF Rank #1.
Turtle Beach Corporation (HEAR - Free Report) – Up 1214%
This California-based audio technology company provides gaming headset solutions for various platforms, including video game and entertainment consoles, handheld consoles, personal computers, and mobile and tablet devices under the Turtle Beach brand. The stock has witnessed solid earnings estimate revision of 64 cents over the past 90 days for this year and has an estimated earnings growth rate of 520.83%. It has a Zacks Rank #1 and a VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Comtech Telecommunications Corp. (CMTL - Free Report) – Up 56.4%
This New York-based company designs, develops, produces and markets innovative products, systems and services for advanced communications solutions. The stock has seen positive earnings estimate revision of 5 cents over the past 90 days for the fiscal year (ending August 2018) and has an estimated earnings growth rate of 247.06%. It has a Zacks Rank #1 and a VGM Score of B.
Fortinet Inc. (FTNT - Free Report) – Up 53.4%
This California-based company is a provider of network security appliances and Unified Threat Management network security solutions to enterprises, service providers and government entities worldwide. The stock has seen positive earnings estimate revision of 12 cents over the past 90 days for this year and has an estimated earnings growth rate of 48.08%. It has a Zacks Rank #2 and a VGM Score of B (see: all the Technology ETFs here).
NetApp Inc. (NTAP - Free Report) – Up 48%
This California-based data authority for hybrid cloud provides a full range of hybrid cloud data services that simplify management of applications and data across cloud and on-premises environments to accelerate digital transformation. The stock has ssen positive earnings estimate revision of 11 cents over the past 90 days for the fiscal year (ending April 2019) and has an estimated earnings growth rate of 17%. It has a Zacks Rank #1 and a VGM Score of B.
Virtusa Corporation (VRTU - Free Report) – Up 23.4%
This Massachusetts-based company provides digital engineering and information technology (IT) outsourcing services worldwide. The stock saw positive earnings estimate revision of a penny over the past 90 days for the fiscal year (ending March 2019) and has an estimated earnings growth rate of 34.97%. It has a Zacks Rank #2 and a VGM Score of B.
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