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Wall Street continued its stellar run in October with the S&P 500 logging in gains of 2.2%. This not only represents the best month since February but also the seventh straight month of advances - its longest streak since May 2013. As such, investors flocked to the two ultra-popular ETFs tracking the index last month.
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SPDR S&P 500 ETF Trust (NYSEARCA: SPY ) and iShares Core S&P 500 ETF (NYSEARCA: IVV ) have pulled in about $7.1 billion and $3.5 billion, respectively, in capital. IVV looks more compelling at present given its solid Zacks ETF Rank #2 (Buy). SPY has a Zacks ETF Rank #3 (Hold).
IVV in Focus
IVV holds 506 stocks in its basket, with each security holding no more than 3.9% of total assets. This suggests a nice balance across securities and prevents heavy concentration.
However, the product is slightly tilted toward the information technology sector with 24.1% share, while financials, health care, consumer discretionary and industrials account for a double-digit exposure each. The ETF is the low-cost choice in the space, charging 4 bps in fees per year from investors and trades in solid volume of 3.3 million shares a day on average. It gained 1.7% in October.
Inside The Surge
Most of the gains came from the surge in technology sector, which had its best monthly gain of 7.7% since July 2016. A deluge of better-than-expected earnings results across various sectors as well as high hopes of the tax reform getting passed added to the strength.
In fact, five technology stocks - Amazon.com, Inc. (NASDAQ: AMZN ), Microsoft Corporation (NASDAQ: MSFT ), Google-parent Alphabet Inc (NASDAQ: GOOGL ), Apple Inc. (NASDAQ: AAPL ), and Facebook Inc (NASDAQ: FB ) - accounted for more than half of the gains in the S&P 500 index.
Three of the five companies reported blockbuster quarterly earnings, sending their shares higher while Facebook and Apple are slated to release their earnings after the market close on Nov 1 and Nov 2, respectively.
Further, the five tech giants added $181 billion to their combined market value on Oct 27.
Let's dig into the fundamentals of these five hot technology stocks with their respective positions in the fund's basket:
Amazon.com: AMZN stock occupies the third position and makes up for 2% allocation in the fund's basket. It delivered strong returns of 14.6% in October.
Amazon came up with a wide earnings beat of 5100% and a positive outlook for the holiday quarter. It has seen solid earnings estimate revision of 53 cents for this year in the past week and its ranking jumping to Zack Rank #2. Further, Amazon belongs to a solid industry having a Zacks Rank in the top 41% .
Microsoft: MSFT stock takes the second spot in the fund's basket accounting for 2.9% of assets. It surged 12.5% in October and posted stellar results with earnings surprise of 16.67%.
Microsoft saw solid earnings estimate revision of 16 cents for this year, last week, following its earnings announcement and was upgraded to Zacks Rank #2. It belongs a robust Zacks Industry Rank in the top 34% .
Alphabet: GOOGL stock gained 6.2% last month and takes the ninth position in the fund's basket with 1.4% allocation.
Alphabet came up with a 13.52% earnings surprise that resulted in increasing earnings estimates from the analysts. The stock saw a whopping earnings estimate revision of 82 cents for this year, last week. Alphabet has a Zacks Rank #2 and belongs to solid Zacks Industry Rank in the top 40%.
Facebook: FB stock has added 4.1% in October and sports a Zacks Rank #1 (Strong Buy). The company has seen positive earnings estimate revision of nine cents for this year, over the past three months, with an expected earnings growth rate of 26.5%.
However, Facebook has an Earnings ESP of -0.63%, indicating lower chances of beating estimates this quarter. The stock has a solid Zacks Industry Rank in the top 40% and holds the third position in IVV with just 1.9% share. You can see the complete list of today's Zacks #1 Rank stocks here .
Apple: AAPL stock was up about 5.8% last month. It has a Zacks Rank #3 (Hold) and an Earnings ESP of -0.82%, indicating lower chances of beating estimates this quarter. The stock saw no estimate revision activity for this year, in the past three months, and belongs to a solid Zacks Industry Rank in the top 5%. Apple is the top firm in IVV, accounting for 3.9% of assets.
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