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Play the Alphabet Earnings Beat With These 5 Mutual Funds

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Alphabet Inc. (GOOGL - Free Report) posted favorable earnings results in its second quarter. The stellar show was largely due to the company adopting new accounting rules for its investment in Uber Technologies. Alphabet’s earnings numbers would have been higher if the tech giant did not have to bear a fine of $5 billion charged by the European Union owing to antitrust violations by Alphabet’s Android.

Nonetheless, Alphabet’s encouraging earnings results had a positive impact on the tech sector and boosted investor sentiment. Following these promising trends, investing in technology mutual funds with a significant holding in the Bill Gates-owned company will be a prudent decision.

Q2 Earnings in Focus

In the second quarter, Alphabet reported diluted earnings of $11.75 per share (metric excludes EU fine, lowers to $4.54 if included), up more than 100% year over year. Earnings include a $1.17 per share benefit from a new accounting standard that changes the way companies account for equity security investments in Uber.

Including this development, Alphabet’s diluted earnings beat the Zacks Consensus Estimate of $9.51 per share. Total revenues came in at $26.24 billion, above the Zacks Consensus Estimate of $25.64 billion. (Read More: Alphabet Inc. Crushes Earnings, Surges 5% on Strong Performance)

Alphabet’s Rally Boosts Tech Sector

In the second quarter, tech sector earnings are expected to be up +24.5% on +11.4% higher revenues, which would follow +31.1% earnings growth on +13.1% revenue growth in the first quarter. Additionally, out of the 40 Internet – Services companies, 32 of them reported earnings with 18 of the 32 companies posted earnings beat. (Read More: Q2 Earnings Season Showing Strong Revenue Momentum)

Alphabet became the latest tech giant to come up with upbeat earnings and revenue growth levels. Additionally, the tech sector has jumped 14% year-to-date (YTD), becoming the best performing sector on the S&P 500. In fact, the tech sector’s performance is better than the S&P 500’s increase of 5%. Additionally, mutual funds related to this sector registered strong returns. According to Morningstar, technology mutual funds have returned 15.7% YTD.

Buy 5 Tech Mutual Funds

Here we have selected five mutual funds that have significant exposure to the tech sector and Alphabet as one of the top three holdings. Moreover, these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

These funds also have encouraging one-year annualized returns and minimum initial investment is within $5000. Also, each of these funds has a low expense ratio.

Putnam Global Technology A (PGTAX - Free Report) seeks appreciation of capital. PGTAX invests a large chunk of its assets in securities of technology companies. The fund invests mainly in large- and mid-cap tech companies that are expected to have encouraging investment prospects.

PGTAX carries an expense ratio of 1.28% compared with the category average of 1.41%. Moreover, PGTAX requires a minimal initial investment of $500. The fund has one-year annualized returns of 34.4%.

PGTAX has a Zacks Mutual Fund Rank #2. Further, as of the last filing, Alphabet, Microsoft, and Facebook were the top holdings for PGTAX.

BlackRock Science & Technology Opportunities Investor A (BGSAX - Free Report) invests a major portion of its assets in equity securities issued by domestic and foreign science and technology companies. BGSAX may invest a maximum 25% of its net assets in emerging economies.

BGSAX carries an expense ratio of 1.17% compared with the category average of 1.41%. Moreover, BGSAX requires a minimal initial investment of $1,000. The fund has one-year annualized returns of 39.8%.

BGSAX has a Zacks Mutual Fund Rank #1. Further, as of the last filing, Amazon, Alphabet, and Microsoft were the top holdings for BGSAX.

Columbia Global Technology Growth Z (CMTFX - Free Report) seeks appreciation of capital. CMTFX invests a bulk of its assets in equity securities, including common stocks, preferred stocks, and securities of technology companies.

CMTFX carries an expense ratio of 1.06% compared with the category average of 1.41%. Moreover, CMTFX requires a minimal initial investment of $2,000. The fund has one-year annualized returns of 32.9%.

CMTFX has a Zacks Mutual Fund Rank #1. Further, as of the last filing, Microsoft, Alphabet, and Amazon were the top holdings for CMTFX.

Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) invests a big part of its assets in companies whose primary operations are related to software or information-based services. FSCSX primarily focuses on acquiring common stocks of both domestic and foreign companies.

FSCSX carries an expense ratio of 0.73%, compared with the category average of 1.41%. Moreover, FSCSX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 32.6%.

FSCSX has a Zacks Mutual Fund Rank #2. Further, as of the last filing, Microsoft, Facebook, and Alphabet were the top holdings for FSCSX.

T. Rowe Price Science & Technology Advisor (PASTX - Free Report) invests the majority of its net assets in common stocks of companies expected to benefit from the development and use of science and/or technology. PASTX invests in both U.S. and non-U.S. companies.

PASTX carries an expense ratio of 1.05% compared with the category average of 1.41%. Moreover, PASTX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 27.7%.

PASTX has a Zacks Mutual Fund Rank #2. Further, as of the last filing, Alphabet, Ctrip.com International, and Qualcomm were the top holdings for PASTX. 

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