After a tumultuous January, the tech sector has started to show some positive momentum buoyed by bouts of strong quarterly earnings. Plus, rising rate worries have triggered a sell-off in the tech stocks, making them compelling bargain buys at the current levels.
Given this, we have chosen five ETFs that are down by double digits from a year-to-date look and boast a solid Zacks ETF Rank #1 (Strong Buy) or 2 (Buy). These include
SPDR S&P Semiconductor ETF
XSD
,
Invesco DWA Technology Momentum ETF
PTF
,
WisdomTree Cloud Computing Fund
WCLD
,
iShares North American Tech-Multimedia Networking ETF
IGN
and
SPDR NYSE Technology ETF
XNTK
.
The five Big Tech players — Amazon
AMZN
, Alphabet
GOOGL
, Apple
AAPL
, Meta Platforms
FB
and Microsoft
MSFT
— collectively account for 22.5% of the S&P 500 Index’s market capitalization and are contributing 20% of the index’s Q4 earnings. These five companies combined earned
$98.6 billion
in earnings on $408.6 billion in revenues, representing year-over-year growth rates of 26.7% and 15.3%, respectively.
While Alphabet and Amazon added hundreds of billions of dollars to their market capitalizations following the days of the earnings announcement, Facebook lost after its disappointing results (read:
Be Choosy In Tech Investing: ETFs to Buy/Sell
).
Although technology has experienced big declines on Fed’s rate hike expectations, it seems one of the safest sectors in a tight policy era given that most companies are sitting on a huge cash pile. The cash reserves will ensure that these companies are not plagued by any financial trouble, even in a rising interest rate environment.
Further, the sector outlook remains solid given the global digital shift that has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence, machine learning, digital communication and 5G technology should drive the sector higher.
SPDR S&P Semiconductor ETF (XSD) – Down 17.6%
The pandemic has bolstered demand for chips in leaps and bounds, leading to the worst global shortage in many years. As such, global semiconductor revenues spiked 25.1% last year to $583.5 billion, crossing the $500 billion threshold for the first time, according to preliminary results by Gartner. The solid trend is likely to continue this year and sales are expected to grow by another 9% this year.
SPDR S&P Semiconductor ETF tracks the S&P Semiconductor Select Industry Index, holding 41 stocks in its portfolio with each making up for not more than 3% share. It is less popular with AUM of $1.3 billion and an average daily volume of about 107,000 shares. SPDR S&P Semiconductor ETF charges 35 bps in fees per year and has a Zacks ETF Rank #1 with a High risk outlook (read:
5 Cheap ETFs to Play Amid Tech Stocks’ Worst Start Since 2016
).
Invesco DWA Technology Momentum ETF (PTF) – Down 16.6%
Invesco DWA Technology Momentum ETF follows the Dorsey Wright Technology Technical Leaders Index, and provides exposure to 40 companies that are showing relative strength (momentum).
Invesco DWA Technology Momentum ETF is relatively illiquid and unpopular with AUM of $296.8 million and an average daily volume of 26,000 shares. The fund charges 60 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook.
WisdomTree Cloud Computing Fund (WCLD) – Down 15.3%
WisdomTree Cloud Computing Fund offers exposure to emerging and 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 58 stocks in its basket and charges investors 45 bps in fees per year (read:
5 ETF Predictions for 2022
).
WisdomTree Cloud Computing Fund has amassed $902.4 million in its asset base and trades in an average daily volume of 613,000 shares. It has a Zacks ETF Rank #2.
iShares North American Tech-Multimedia Networking ETF (IGN) – Down 15%
iShares North American Tech-Multimedia Networking ETF proved resilient amid the tech sell-off jitters. It provides exposure to telecom equipment, data networking and wireless equipment companies by tracking the S&P North American Technology-Multimedia Networking Index. iShares North American Tech-Multimedia Networking ETF holds 22 securities in its basket.
iShares North American Tech-Multimedia Networking ETF has accumulated $132.6 million in its asset base and charges 43 bps in annual fees. The product sees a lower volume of around 16,000 shares a day and carries a Zacks ETF Rank #2 with a High risk outlook.
SPDR NYSE Technology ETF (XNTK) – Down 12.7%
SPDR NYSE Technology ETF provides exposure to 35 leading U.S.-listed technology-related companies by tracking the NYSE Technology Index. Semiconductors take the largest share at 24.5% while Internet & direct marketing retail, systems software and semiconductor equipment round off the next spots.
SPDR NYSE Technology ETF has amassed $622 million and charges 35 bps in annual fees. It trades in an average daily volume of 24,000 shares and has a Zacks ETF Rank #1.
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