The year 2013 has been good for the equity markets so far even
with high levels of volatility following the panic over the
tapering talks. While most of the sectors have performed well this
year, the technology sector remains stressed due to uncertainty
surrounding some of the top tech players.
In fact, the SPDR S&P 500 (
) has posted year-to-date returns of around 14.7% and the
Technology Select Sector SPDR Fund (
), which tracks the stock market performance of the technology
segment in the U.S. equity market, is up by just about 8.7% (read:
Tech ETFs Slump on Microsoft Earnings Miss
The weakness in tech sector ETFs was due in large part to the
sluggish performances this earnings season from the top players
such as Google (
), Microsoft (
), International Business Machines (
), Hewlett-Packard (
) and Intel Corp. (
This is because these firms are seeing weak overseas demand,
overall reduction in global information technology spending, and a
strong dollar just to name a few headwinds to global tech stocks.
While most large cap ETFs have recently shown weakness in their
prices, some remained unperturbed by dull performances and are
enjoying a surge in prices. Here, we have highlighted three broad
tech ETFs that have less exposure to the big players and are the
real winners in the current environment.
In fact, unlike large cap counterparts, these funds performed well
with double digit returns and easily outpaced the SPY by wide
margins in the year-to-date period (read:
3 Top Ranked Sector ETFs for Earnings Season
PowerShares S&P SmallCap Information Technology ETF (
Investors seeking higher returns in the tech space could find PSCT
an intriguing choice. The fund provides exposure to 127 pint-sized
securities by tracking the S&P SmallCap 600 Capped Information
The product manages an asset base of $160 million while volume is
light, suggesting additional cost in the form of wide bid/ask
spread beyond the expense ratio of 0.29%. In terms of holdings, the
ETF is well spread across each security as none of them holds more
than 2.75% of assets.
However, the fund has a tilt towards growth stocks, indicating that
it will gain more when the market moves upward. The fund has
returned nearly 24% year-to-date (read:
6 ETFs Beating the Market Over the Past Year
Guggenheim S&P Equal Weight Technology ETF (
This ETF tracks the S&P 500 Equal Weight Index Information
Technology, holding 70 securities in the basket. The product seeks
to follow equal allocation towards the entire spectrum of market
capitalization levels, thereby minimizing concentration risk.
This approach helps to maintain portfolio balance and seems to be
winning strategy for RYT. The fund has amassed $219.4 million in
its asset base and it charges a higher expense ratio of 50 bps in
fees per year from investors (read:
Are Equal Weight ETFs Worth The Cost?
The ETF has added about 22.3% so far in the year.
PowerShares Dynamic Technology Sector Fund (
With AUM of $33.4 million, the fund tracks the Dynamic Technology
Sector Intellidex Index. The stocks in the fund are evaluated on
good investment merits such as price momentum, earnings momentum,
quality, management action and value.
This produces a fund with a total holding of 60 stocks while
charging an expense ratio of 65 basis points on an annual basis.
The fund eliminates concentration risk here again as each security
holds less than 2.65% of PTF. The ETF provides a nice mix across
each asset class by allocating 44% share to small caps, 30% to
large caps and the rest to mid caps.
PTF has gained over 17.8% in the year-to-date timeframe.
A number of large cap tech ETFs are currently under pressure due to
lackluster performances by big tech firms and are showing loses in
this earnings season. Investors should focus on the tech ETFs that
avoid big names at present due to economic uncertainty (see more in
However, the funds discussed above seem well positioned as we
progress into the second half of the year as cloud computing and
mobility segments are gaining importance and offering new avenues
for growth in the sector.
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PWRSH-SP SC IT (PSCT): ETF Research Reports
PWRSH-DYN TECH (PTF): ETF Research Reports
GUGG-SP5 EW TEC (RYT): ETF Research Reports
SPDR-TECH SELS (XLK): ETF Research Reports
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