Tech companies have long been leaders of the market. Firms
have powered portfolios for quite some time, but there is now
some speculation-and hard data-that suggests their reign over the
best performing list is nearing an end.
This is particularly true after Apple's latest earnings
debacle, and some other large cap weakness on the earnings and
guidance front. This trend has pushed the broad space to a
sluggish performance to start 2013.
This is a pretty surprising development as the tech sector of
the S&P 500 was, for quite some time, driving the market
higher. However, seemingly as soon as the calendar turned to the
New Year, tech began to lag, at least in the large cap space.
Looking at all the technology
on the market, all of the worst performers come to us from the
broad-read large cap focused-tech funds like
Beyond those underperformers, we see other 'traditional' tech
products occupying the bottom of the list such as software and
networking funds (read
Why Earnings are Key for the Tech ETF
To me, this suggests that the old guard of the tech world is
at an interesting crossroads, and that its leadership over the
space-at least in terms of price gains-may be nearing an end.
That isn't to say that technology ETFs have all been falling
by the wayside though, as we have seen a trio of new product
types take the mantle from the Apples of the world to start
The three best performing segments in the tech world have been
heavily concentrated into a few sectors. These include social
firms, the broad internet space, and emerging market technology.
Most of these have crushed broad market expectations and a few
have actually added more than double digits to start the year
5 Sector ETFs Surging to Start 2013
This is pretty incredible given the broad sluggish performance
in the technology world to start the year, and the widespread
uncertainty over some of the top tech players and their outlooks
for 2013. If the trend can continue, it could mean that for
tech-focused ETF investors, now could be the time to take a
closer look at some of the following funds for outperformance
Emerging Market Tech ETFs
Leading the charge in this space are three funds, two of which
have a China focus. These include
, which has a broad emerging market tech allocation.
All three have added more than 7% to start 2013, easily
leading the way for the broad tech market to begin the year.
However, investors should note that all three aren't exactly
popular with investors and have low assets and wide bid ask
This can increase the total stated cost of these funds, but
clearly this hasn't been much of an issue so far this year (see
Can Anything Stop These Southeast Asia ETFs?
In this corner, investors have two funds to choose from, the
First Trust Dow Jones Internet Index ETF (
PowerShares NASDAQ Internet Portfolio (
. Both of these ETFs have added over 7.5% to start 2013, while
both have added more than 22% in the trailing one year period as
Clearly, the internet space is producing some new leaders for
the tech market, thanks in part to their more diversified
holdings profiles. Both of these have significant components in
the consumer cyclical space-thanks to firms like
-and their strong performances in the past year have certainly
acted as a catalyst for the internet ETF space.
A newer, but increasingly popular, segment of the technology
world is the social market. This is best represented by the
Global X Social Media Index ETF (
, but the
ETRACS Next Generation Internet ETN (
which has holdings in
, as well.
These two have also seen solid performances to start 2013 with
both adding more than 7%. However, once again volume and assets
are rather low for both so bid ask spreads-along with relatively
high expense ratios-could increase total costs for investors
Social Media ETFs: Time to Buy?
Special Mention- Solid State Drives
While the space isn't exactly famous to many investors, the
solid state drive market has led the way for the tech world to
start 2013. This corner of the market, which represents firms
that are engaged in the production or development of this new age
storage process, is best played by
This ETN from ETRACS has added more than 12% to start 2013,
but it is heavily concentrated as it holds just 11 securities in
total. Additionally, volume is extremely low so bid ask spreads
may be wide, though its solid performance and the bright outlook
for the space helps to make up for this to some extent.
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APPLE INC (AAPL): Free Stock Analysis Report
GUGG-CHINA TEC (CQQQ): ETF Research Reports
E-TRC NGI (EIPO): ETF Research Reports
FT-DJ INTRNT IX (FDN): ETF Research Reports
ISHARS-DJ TECH (IYW): ETF Research Reports
PWRSH-ND INTRNT (PNQI): ETF Research Reports
GLBL-X NDQ CHIN (QQQC): ETF Research Reports
GLBL-X SOCL MDA (SOCL): ETF Research Reports
E-TRC ISE SSD (SSDD): ETF Research Reports
VIPERS-INFO TEC (VGT): ETF Research Reports
SPDR-TECH SELS (XLK): ETF Research Reports
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