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Technology has been the hottest sector so far this year, even though the outbreak of coronavirus has hit the stocks. This is especially due to the initial U.S.-China trade deal and a resilient domestic economy. Notably, the sector has huge exposure to China (read: Technology ETF Hits New 52-Week High).
Better-than-expected earnings have added to the strength, leading to spike in the stocks. Fourth-quarter earnings from 80.8% of the sector’s total market cap in the S&P 500 Index are up 6.2% on 6.3% higher revenues, with 85.3% beating on earnings and an equal proportion beating revenue estimates. In particular, Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) and Intel (INTC - Free Report) instilled strong optimism, topping both earnings and revenue estimates.
Apple offered an upbeat outlook for the ongoing quarter and reversed the recent trend of declining growth in iPhone. The world's largest software maker also witnessed a rebound in Azure sales growth. Intel also provided an upbeat guidance (read: Microsoft's Azure Returns to Growth: 5 ETFs to Buy).
Further, the rapid emergence of cutting-edge technology, including cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence and machine learning has been driving the sector. The growing adoption of 5G technology — the next wireless revolution — is creating further opportunities. The wave of mergers and acquisitions is also providing further impetus to the space.
Moreover, technology has a solid Zacks Sector Rank, being in the top 13%, suggesting continued growth in the coming months.
Given this, investors might want to tap the space with the best-performing technology ETFs and stocks of this year so far. For them, we have highlighted some of the top-ranked ones that could be excellent picks for investors seeking to benefit from the current trends:
Best ETFs
ARK Next Generation Internet ETF (ARKW - Free Report) – Up 15%
This is an actively managed fund focusing on companies that are expected to benefit from the shift in technology infrastructure to the cloud, enabling mobile, new and local services. The fund holds 44 stocks in its basket with AUM of $506.1 million. It trades in average daily volume of 117,000 shares and charges 76 basis points (bps) in annual fees from investors (read: 5 Sector ETFs That Crushed the Market in January).
This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly-traded growth stocks of next generation technology and tech-enabled companies. It holds 10 stocks in its basket and has accumulated $38.8 million in its asset base within three months of debut. The product charges 58 bps in annual fees and trades in volume of 5,000 shares a day on average.
WisdomTree Cloud Computing Fund (WCLD - Free Report) – Up 11.3%
This ETF offers exposure to emerging, fast-growing U.S.-listed companies (including ADRs) that are primarily focused on cloud software and services, and follows the BVP Nasdaq Emerging Cloud Index. It holds 48 stocks in its basket and charges investors 45 bps in fees per year. The product has amassed $21.9 million in its asset base and trades in average daily volume of 11,000 shares (read: 5 Best-Performing Stocks of the Best ETF of January).
This is an actively managed fund seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies (Genomic Revolution). It also invests in firms that seek to gain from industrial innovation in energy, automation and manufacturing (Industrial Innovation), increased use of shared technology, infrastructure and services (Next Generation Internet), and technologies that make financial services more efficient. In total, the fund holds 42 securities in its basket and charges 75 bps in annual fees. The product has gathered $2.2 billion in its asset base and trades in average daily volume of 248,000 shares.
O’Shares Global Internet Giants ETF (OGIG - Free Report) – Up 10.4%
The fund invests in some of the largest global companies that derive most of their revenues from the Internet and e-commerce sectors that exhibit quality and growth potential by tracking the O’Shares Global Internet Giants Index. It holds a basket of 86 stocks and charges 48 bps in annual fees. OGIG has been able to attract $51.2 million in its asset base and trades in average daily volume of 17,000 shares.
This is a global technology company that delivers online advertising solutions and search monetization to brands and publishers. The stock has witnessed solid earnings estimate revision of 7 cents over the past 30 days for this year and has an estimated earnings growth rate of 45.3%. It has a Zacks Rank #2 and VGM Score of A.
MagnaChip Semiconductor Corporation (MX - Free Report) – Up 24.5%
This company operates as a designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. The stock has seen solid earnings estimate revision of 31 cents over the past 30 days for this year and has an estimated earnings growth rate of 242.1%. It has a Zacks Rank #1 and VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Churchill Capital Corp. – Up 22.7%
This information services and analytics company offers scientific, patient and academic research, as well as intelligence, domain and brand protection and intellectual property management solutions. The stock has seen positive earnings estimate revision of 4 cents over the past 30 days for this year, and has an estimated earnings growth rate of 44%. It has a Zacks Rank #2 and VGM Score of B.
It is primarily engaged in the development and sale of software products with particular focus on intelligent character recognition and forms processing technology, products and services for the document imaging markets. The stock has seen positive earnings estimate revision of couple of cents in a month for fiscal year (ending September 2020) and has an estimated earnings growth rate of 21.4%. It has a Zacks Rank #1 and VGM Score of B (see: all the Technology ETFs here).
This company supplies wafer fabrication equipment and services to the semiconductor industry. The stock saw solid earnings estimate revision of $1.78 over the past 30 days for fiscal year (ending June 2020) and has an estimated earnings growth rate of 15.6%. It has a Zacks Rank #2 and VGM Score of A.
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Tech ETFs & Stocks Outperforming in 2020
Technology has been the hottest sector so far this year, even though the outbreak of coronavirus has hit the stocks. This is especially due to the initial U.S.-China trade deal and a resilient domestic economy. Notably, the sector has huge exposure to China (read: Technology ETF Hits New 52-Week High).
Better-than-expected earnings have added to the strength, leading to spike in the stocks. Fourth-quarter earnings from 80.8% of the sector’s total market cap in the S&P 500 Index are up 6.2% on 6.3% higher revenues, with 85.3% beating on earnings and an equal proportion beating revenue estimates. In particular, Apple (AAPL - Free Report) , Microsoft (MSFT - Free Report) and Intel (INTC - Free Report) instilled strong optimism, topping both earnings and revenue estimates.
Apple offered an upbeat outlook for the ongoing quarter and reversed the recent trend of declining growth in iPhone. The world's largest software maker also witnessed a rebound in Azure sales growth. Intel also provided an upbeat guidance (read: Microsoft's Azure Returns to Growth: 5 ETFs to Buy).
Further, the rapid emergence of cutting-edge technology, including cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence and machine learning has been driving the sector. The growing adoption of 5G technology — the next wireless revolution — is creating further opportunities. The wave of mergers and acquisitions is also providing further impetus to the space.
Moreover, technology has a solid Zacks Sector Rank, being in the top 13%, suggesting continued growth in the coming months.
Given this, investors might want to tap the space with the best-performing technology ETFs and stocks of this year so far. For them, we have highlighted some of the top-ranked ones that could be excellent picks for investors seeking to benefit from the current trends:
Best ETFs
ARK Next Generation Internet ETF (ARKW - Free Report) – Up 15%
This is an actively managed fund focusing on companies that are expected to benefit from the shift in technology infrastructure to the cloud, enabling mobile, new and local services. The fund holds 44 stocks in its basket with AUM of $506.1 million. It trades in average daily volume of 117,000 shares and charges 76 basis points (bps) in annual fees from investors (read: 5 Sector ETFs That Crushed the Market in January).
MicroSectors FANG+ ETN FNGS – Up 13.8%
This ETN is linked to the performance of the NYSE FANG+ Index, which is an equal-dollar weighted index, designed to provide exposure to a group of highly-traded growth stocks of next generation technology and tech-enabled companies. It holds 10 stocks in its basket and has accumulated $38.8 million in its asset base within three months of debut. The product charges 58 bps in annual fees and trades in volume of 5,000 shares a day on average.
WisdomTree Cloud Computing Fund (WCLD - Free Report) – Up 11.3%
This ETF offers exposure to emerging, fast-growing U.S.-listed companies (including ADRs) that are primarily focused on cloud software and services, and follows the BVP Nasdaq Emerging Cloud Index. It holds 48 stocks in its basket and charges investors 45 bps in fees per year. The product has amassed $21.9 million in its asset base and trades in average daily volume of 11,000 shares (read: 5 Best-Performing Stocks of the Best ETF of January).
ARK Innovation ETF (ARKK - Free Report) – Up 10.9%
This is an actively managed fund seeking long-term capital appreciation by investing in companies that benefit from the development of new products or services, technological improvements and advancements in scientific research relating to the areas of DNA technologies (Genomic Revolution). It also invests in firms that seek to gain from industrial innovation in energy, automation and manufacturing (Industrial Innovation), increased use of shared technology, infrastructure and services (Next Generation Internet), and technologies that make financial services more efficient. In total, the fund holds 42 securities in its basket and charges 75 bps in annual fees. The product has gathered $2.2 billion in its asset base and trades in average daily volume of 248,000 shares.
O’Shares Global Internet Giants ETF (OGIG - Free Report) – Up 10.4%
The fund invests in some of the largest global companies that derive most of their revenues from the Internet and e-commerce sectors that exhibit quality and growth potential by tracking the O’Shares Global Internet Giants Index. It holds a basket of 86 stocks and charges 48 bps in annual fees. OGIG has been able to attract $51.2 million in its asset base and trades in average daily volume of 17,000 shares.
Best Stocks
Perion Network Ltd (PERI - Free Report) – Up 31.3%
This is a global technology company that delivers online advertising solutions and search monetization to brands and publishers. The stock has witnessed solid earnings estimate revision of 7 cents over the past 30 days for this year and has an estimated earnings growth rate of 45.3%. It has a Zacks Rank #2 and VGM Score of A.
MagnaChip Semiconductor Corporation (MX - Free Report) – Up 24.5%
This company operates as a designer and manufacturer of analog and mixed-signal semiconductor products for high-volume consumer applications. The stock has seen solid earnings estimate revision of 31 cents over the past 30 days for this year and has an estimated earnings growth rate of 242.1%. It has a Zacks Rank #1 and VGM Score of A. You can see the complete list of today’s Zacks #1 Rank stocks here.
Churchill Capital Corp. – Up 22.7%
This information services and analytics company offers scientific, patient and academic research, as well as intelligence, domain and brand protection and intellectual property management solutions. The stock has seen positive earnings estimate revision of 4 cents over the past 30 days for this year, and has an estimated earnings growth rate of 44%. It has a Zacks Rank #2 and VGM Score of B.
Mitek Systems Inc. (MITK - Free Report) – Up 20.4%
It is primarily engaged in the development and sale of software products with particular focus on intelligent character recognition and forms processing technology, products and services for the document imaging markets. The stock has seen positive earnings estimate revision of couple of cents in a month for fiscal year (ending September 2020) and has an estimated earnings growth rate of 21.4%. It has a Zacks Rank #1 and VGM Score of B (see: all the Technology ETFs here).
Lam Research Corporation (LRCX - Free Report) – Up 11.3%
This company supplies wafer fabrication equipment and services to the semiconductor industry. The stock saw solid earnings estimate revision of $1.78 over the past 30 days for fiscal year (ending June 2020) and has an estimated earnings growth rate of 15.6%. It has a Zacks Rank #2 and VGM Score of A.
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 >>