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4 Tech ETFs Losing the Least in Thursday's Brutal Trading

Zacks Equity Research

The start of December was painful for tech stocks with the tech-laden PowerShares QQQ ETF QQQ that tracks the Nasdaq-100 index having lost over 1.7% on the very first day. Tech stocks fell into the questionable spot since Donald Trump’s win. 

This is because Trump is expected to take stricter steps on immigration and outsourcing – the two pillars that the tech sector stands on. Several technology companies like Apple AAPL outsource their manufacturing activities to low-cost countries like China and Taiwan (read: Tech ETFs to Watch Post Apple's Mixed Bag Q4).

Though QQQ moved gently for most of November following election, if not returning impressively like the S&P 500 and Dow Jones Industrial Average, it lost all its strength to enter December. The key tech ETF Technology Select Sector SPDR ETF XLK lost 2.1% on December 1 while semiconductor ETFs like PowerShares Dynamic Semiconductors Portfolio PSI and iShares PHLX Semiconductor ETF SOXX were down about 5.6% and 4.9%, respectively (read: Top-Ranked ETFs & Stocks Soaring to All-Time Highs).

Why the Selloff

The recent sell-off in the tech space could be due to lack of fuel in the Trump rally, profit booking activity especially in the semiconductor space, rising bets on faster Fed policy tightening and uncertainty in Trump’s policy stance over the tech space. On December 1, the benchmark U.S. Treasury yield spiked to 2.45% -- a level not seen since 2015. So, the anxiety of faster ceases in cheap money inflows probably weighed on tech stocks.

Having said this, we would like to note that all tech ETFs were not equally battered. There are a number of products that sailed through stormy trading on Thursday. These products even lost lower than 1% on the potential of the underlying stocks and industries that these operate in. We highlight four such ETFs in detail (read: What Tech Crash? These ETFs are Still Top Picks).

Direxion Daily Cyber Security & IT Bull 2X Shares HAKK – Down 0.03%

The fund gives exposure to double the performance of the ISE Cyber Security Index. The index’s top three holdings include Imperva (4.97%), Infoblox (4.8%) and Palo Alto Networks (4.5%). The Systems Software (56.97%) industry gets the highest portion of the fund followed by 17.3% focus on communications equipment. The net expense ratio of the fund is 0.80%.

First Trust Nasdaq Smartphone Index Fund FONE – Down 0.54%

The fund looks to track the performance of companies engaged in the smartphone segment of the telecom and technology sectors. The fund – heavy on semiconductors (21.6%) and telecom equipment (18.93%) – charges 70 bps in fees. The U.S. gets the highest allocation of 41.5% in the fund. Sanmina Corp (3.8%), Benchmark Electronics (3.5%) and Celestica (3.4%) are the top three holdings of the fund (read: 5 Millennial Friendly ETF Investing Ideas).

ARK Web x.0 ETF ARKW – Down 0.55%

The fund is heavy on Cloud Computing & Cyber Security (24%), Big Data & Machine Learning (19%) and E-Commerce (17%). Amazon, Athenahealth and Netflix are the top three holdings of the fund. The fund charges 75 bps in fees (see all technology ETFs here).

SPDR S&P International Technology Sector ETF IPK – Down 0.60%

The fund looks to track the S&P Developed Ex-U.S. BMI Information Technology Sector Index. Japan (32.65%) and South Korea (21.66%) receive the highest geographical weight in the fund. Electronic Equipment Instruments & Components (19.95%) and Software (19.41%) are the top sectors of the product. The fund charges 40 bps in fees.

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