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Tech Turmoil Spells ETF Rebounds With Apple, Google

Following disappointing earnings reports from Apple (NasdaqGS: AAPL), Alphabet (NasdaqGS: GOOGL) and Microsoft (NasdaqGS: MSFT), technology sector exchange traded funds (ETFs) are under pressure. That includes the PowerShares QQQ (NasdaqGM: QQQ ) , which tracks the tech heavy Nasdaq-100 Index.

Other ETFs that track the Nasdaq-100 include the First Trust Nasdaq-100 Tech Index (NasdaqGM: QTEC ) and the Direxion NASDAQ-100 Equal Weighted Index Shares (NYSEArca: QQQE ), which track the Nasdaq-100 on an equal-weight basis .

If there is a silver lining to that index's recent struggles it is that investors that missed the previous Nasdaq run higher can gain favorable entry points in the event Nasdaq stocks and ETFs rebound.

Related: 46 Tech ETFs to Tap Into Big Growth Names

"But we feel that the sell-off is overdone now and expect to see these three shares get picked up by bargain hunters. You can only keep high-quality companies like these down so long. With Apple down almost 17 percent since we exited the QQQ ETF, it is looking like a great investment today. There is a lot of talk about peak-iPhone and slowing sales of a lot of its core products, but we expect things will pick up," according to a Seeking Alpha analysis of QQQ.

Of course, QQQ will need help from Apple, Microsoft and the so-called FANG stocks - Facebook (NasdaqGS: FB), Amazon (NasdaqGS: AMZN), Netflix (NasdaqGS: NFLX) and Google to bouce back because the traditional Nasdaq-100 is heavily allocated to those names.

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This year, FANG stocks are falling victim to the notion that top performers rarely show a repeat performance the following year. Since 2005, the top 10 stocks underperformed the following year by an average 290 basis points. Of the 2014 top performers, Union Pacific ( UNP ) and Berkshire Hathaway (NYSE: BRK.B) turned into the worst performers of 2015. That increases the allure of equal-weight options like QQQE because they are not driven by just a few stocks.

Related: Tumbling Tech a Problem for ETF Investors

Additionally, there is no need for investors to attempt to catch the exact bottom in QQQ as waiting for a rebound could prove rewarding.

"This should present investors with a return in the region of 9 percent through to September, ceteris paribus. What the Federal Reserve decides to do between then and now could either enhance or hinder its progress, but we do see this as the higher probability result," adds Seeking Alpha.

For more information on the Tech ETF market, visit our Tech category .

PowerShares QQQ

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article was provided by our partner Tom Lydon of etftrends.com.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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