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5 Undervalued Tech ETFs at Investors' Disposal

Sanghamitra Saha
Investors need to pay close attention to Acadia Healthcare (ACHC) stock based on the movements in the options market lately.

Although trade war fear and a sudden slowdown in global growth contained the broad-based stock market rally this year, the tech space knew no bound. SPDR Dow Jones Industrial Average ETF DIA) is up 1%,SPDR S&P 500 ETF SPY has added about4.1% and the tech-heavy Invesco QQQ Trust QQQ has advanced nearly 12.9% in the year-to-date frame (as of Jul 22, 2018).

Despite being vulnerable to U.S.-Sino trade tensions, the tech space has held its head high thanks to improving industry fundamentals, rapid adoption of emerging technology and President Trump’s proposed corporate tax reform (read: 5 Sector ETFs Most Exposed to Trade Tensions).

Are Overvaluation Concerns Rife?

After such a rally, overvaluation concerns are sure to crop up in investors’ mind. Morningstar equity analysts feel the tech sector is slightly overvalued now, but not as much as the first quarter as global markets are less stretched.

Chris Harvey, head of equity strategy at Wells Fargo, has also started believing that “tech stocks may be nearing a peak.” The Leuthold Group is also worried about the swarming investments in "a very narrow number of popular names" like FAANG stocks (read: 5 Tech ETFs That Crushed FANG ETFs in 2017).

Portfolio Wealth Advisors president and CIO Lee Munson sees overvaluation in tech stocks and that the market is in a state close to 1999 before the burst of the 2000 Dotcom bubble. And hardly any investor wants to bet against FAANG.

This may catch some investors off guard. But then, fundamentals behind the sector are rock solid. So, investors can definitely pick some tech ETFs that are still undervalued.

Are There Any Undervalued Tech ETFs?

Against this backdrop, it would be intriguing to highlight a few tech ETFs that have below-average P/E ratios in the tech space. The P/E ratios of tech ETFs hover in the range of 13.45x to 54.23x. And below-mentioned ETFs have a P/E less than that of the largest tech ETF Technology Select Sector SPDR Fund XLK (18.23x).

Global X Autonomous & Electric Vehicles ETF DRIV – P/E 13.45x

The underlying Solactive Autonomous & Electric Vehicles Index tracks the price movements in shares of companies that are active in the electric vehicles and autonomous driving segments. The fund charges 68 bps in fees (read: Ride the Speeding Electric Vehicle Industry With These ETFs).

Invesco Dynamic Semiconductors ETF PSI – P/E 15.68x

The underlying index gives exposure to stocks of semiconductor companies. The index picks stocks of companies on the basis of factors like fundamental growth, stock valuation, investment timeliness and risk factors. It charges 63 bps in fees (read: Chip ETFs Tumble as Trade Fears Intensify: Time to Buy?).

Reality Shares Nasdaq NexGen Economy ETF BLCN – P/E 16.23x

The underlying index of the fund measures the returns of companies that are committing material resources to developing, researching, supporting, innovating or utilizing blockchain technology for their proprietary use or for use by others. The fund charges 68 bps in fees (read: Will VanEck's Renewed Attempt to Launch Bitcoin ETF Work?).

SPDR S&P Technology Hardware ETF XTH – P/E 16.58x

The fund gives exposure to the technology hardware segment of the S&P Total Market Index. Electronic Equipment & Instruments (37.74%), Technology Hardware Storage & Peripherals (36.95%) and Electronic Components (25.30%) constitute the fund. It charges 35 bps in fees.

Amplify Transformational Data Sharing ETF BLOK – P/E 16.58x

This is an actively managed ETF that looks to provide total returns by investing at least 80% of its net assets in the equity securities of companies actively involved in the development and utilization of transformational data-sharing technologies.

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