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Apple Sees an Awesome August: Play the Momentum With 3 ETFs

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Apple (AAPL - Free Report) has probably seen the best month in five years, having returned about 9.8% in the past month (as of Aug 31). Its stock hit $200 for the first time in the month and it became the first U.S. trillion-dollar company. The terrific run was backed by robust third-quarter fiscal 2018 results with earnings and revenues beating estimates and an upbeat revenue outlook.

Apart from strong fundamentals, Warren Buffett’s outright bullishness on Apple is acting in its favor. Buffett’s company Berkshire Hathaway’s investment in Apple is now “worth around $56 billion” (read: Spread of ETFs to Taste Apple's Trillion Dollar Market Cap).

The conglomerate has about 5% of Apple. Notably, it first revealed its investments in Apple in 2016 and has continued to raise stake since then. Berkshire Hathaway is the third-largest shareholder in Apple, just after Vanguard and BlackRock, per data provided by Bloomberg, as quoted on businessinsider. Not only that, Buffett recently commented that Apple’s £999 iPhone X is ‘enormously underpriced’ (read: Why You Should Believe in Buffett & Bet on These Apple ETFs).

In the recent past, shares of the iPhone maker took a beating owing to the news of slowing iPhone sales. But Apple sold 41.3 million iPhones in the fiscal third quarter, up from 41.03 million units in the year-ago quarter but below the Wall Street estimate of 41.79 million units. However, the average price of $724 per iPhone went up 20% from the year-ago quarter.

 

What Do Indicators Say About Apple?

Going by the valuation metrics, P/E (ttm) of AAPL is 20.6 times versus the industry-average of 18.0 times. Forward P/E of AAPL is 19.5 times versus industry score of 17.1 times. Though these measures point to higher valuation of Apple than the industry, a higher P/E is not always a reason to worry. It shows investors’ confidence in a particular stock among the bunch.

Investors should note that return-on-equity of Apple is 43.5%, higher than the industry average of 35.4%. Plus, both return-on-assets and return-on-capital of Apple are higher than the industry measures. The estimated 3-5 year EPS growth of Apple is now 11.0% versus 9.3% of the industry measure.

The above-said numbers explain why Buffett is backing Apple. Investors should note that the AAPL stock has a Zacks Rank #2 (Buy). It has a decent Value Score of C at the time of writing with a good Growth Score of B. The stock comes from a top-ranked Zacks industry (top 4%) and a top-ranked Zacks sector (top 13%).

ETFs to Tap

Given this, investors seeking to tap the bullishness in the tech titan could consider the following ETFs. These funds have Apple as their top firm with a double-digit allocation.

iShares Dow Jones US Technology ETF (IYW - Free Report) — APPL is at the helm with 18.59% weight. The fund has a Zacks Rank #2.

Select Sector SPDR Technology ETF (XLK - Free Report) — APPL holds the top spot with 15.97% weight. The fund has a Zacks Rank #2.

Vanguard Information Technology ETF (VGT - Free Report) — APPL takes the first location with 16.1% weight. The fund has a Zacks Rank #1 (Strong Buy) (read: ETFs in Focus on GICS Changes: Top Tech & FANG).

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