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Alphabet (GOOGL) Touches New Highs on Blockbuster Q2: ETFs to Tap

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After the closing bell on Monday, Google parent Alphabet (NASDAQ:GOOGL) delighted investors with blockbuster second-quarter 2018 results, topping both revenue and earnings estimates.

Alphabet (GOOGL) Touches New Highs on Blockbuster Q2: ETFs to Tap

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Earnings per share came in at $11.75, trumping the Zacks Consensus Estimate of $9.45 and improving 19% from the year-ago earnings. A booming search business and lower-than-expected payments to ad partners drove the outstanding performance. The impressive numbers came despite a record $5 billion antitrust fine by European antitrust regulators’ for abusing its dominance in mobile software.

Revenues rose 26% year over year to $32.7 billion. Excluding revenues from Google Network Members, revenues were $27.9 billion, topping the estimate of $25.64 billion. Advertising revenues grew 24% year over year to $28.09 billion and accounted for 86% of total revenues. Paid ad clicks on Google’s own sites and apps jumped 58% buoyed by mobile search and YouTube while cost-per-click dropped 22% from the year-ago quarter.

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Following the earnings announcement, shares of GOOGL jumped nearly 5% in early trading to a new high and added about $50 billion in its market cap. With this surge, Alphabet has joined the race of $1 trillion companies along with tech giants Apple (NASDAQ:AAPL) and Amazon (NASDAQ:AMZN).

Currently, Alphabet carries a Zacks Rank #3 (Hold) and has a VGM Score of B. It falls under a top-ranked Zacks industry (top 29%), suggesting continued outperformance.

ETFs in Focus

Investors seeking to bet on the strength in this Internet giant could definitely look into the ETF world. While there are several ETF options available, we have highlighted five with the largest allocation to Alphabet that could be compelling choices.


ETFs to Buy on Alphabet’s Blockbuster Q2: Communication Services Select Sector SPDR Fund (XLC)

The Communication Services Select Sector SPDR Fund (NYSEARCA:XLC) has been newly debuted to track the new communication services sector of the S&P 500 Index and has accumulated $285.9 million already. It holds a small basket of 26 securities with GOOGL occupying the second position at 12%.

The fund charges 13 bps in fees per year from investors and trades in good volume of around 332,000 shares a day on average.


ETFs to Buy on Alphabet’s Blockbuster Q2: O’Shares Global Internet Giants ETF (OGIG)

The O’Shares Global Internet Giants ETF (NYSEARCA:OGIG) invests in some of the largest global companies that derive most of their revenues from the Internet and e-commerce sectors that exhibit quality and growth potential by tracking the O’Shares Global Internet Giants Index. Holding 67 stocks, Alphabet takes the second spot accounting for 6.4% of the assets.

OGIG has been able to attract $52.4 million in its asset base since its debut in early June and trades in average daily volume of 131,000 shares.


ETFs to Buy on Alphabet’s Blockbuster Q2: iShares Dow Jones US Technology ETF (IYW)

The iShares Dow Jones US Technology ETF (NYSEARCA:IYW) tracks the Dow Jones US Technology Index, giving investors exposure to 136 technology stocks. Out of these, GOOGL occupies the fifth position in the basket with 6.2% of the assets.

The fund has AUM of $4.3 billion and charges 44 bps in fees and expenses. Volume is good as it exchanges nearly 241,000 shares in hand a day. The fund has a Zacks ETF Rank #2 (Buy) with a Medium risk outlook.


ETFs to Buy on Alphabet’s Blockbuster Q2: Select Sector SPDR Technology ETF (XLK)

The Select Sector SPDR Technology ETF (NYSEARCA:XLK), the most-popular technology ETF, follows the Technology Select Sector Index and has $22.6 billion in AUM. The fund charges 13 bps in fees per year from investors and trades in heavy volume of around 14.6 million shares a day on average.

It holds about 75 securities in its basket, with GOOGL occupying the fifth position at 5.4%. It has a Zacks ETF Rank #2 with a Medium risk outlook.


ETFs to Buy on Alphabet’s Blockbuster Q2: iShares Evolved U.S. Technology ETF (IETC)

The iShares Evolved U.S. Technology ETF (BATS:IETC) is an active ETF and debuted in the space in late March, having accumulated $5.4 million in its asset base so far. It employs data science techniques to provide exposure to 216 technology stocks.

Alphabet Class C shares take the sixth spot at 5.2%. IETC currently trades in a light volume of 2,000 shares and charges 18 bps in annual fees.

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