The technology sector has been one of the biggest victims of the recent market rout triggered by escalation in U.S.-China trade war and inversion of the yield curve. In particular, the technology companies have large exposure to China. Additionally, increased regulatory concerns also took toll on the sector. This has made the sector attractive to investors.
Additionally, the macro fundamentals seem to be recovering this week given the renewed trade optimism and global easy policies. In the latest trade development, Washington extended a 90-day temporary license allowing China’s Huawei Technologies to continue doing business with U.S. firms. Trade talks between the United States and China are also set to resume anytime soon (read: Global Stimulus & Huawei Relief Boost Markets: ETFs in Focus).
Further, the sector outlook looks promising with the rapid adoption of cutting-edge technology such as cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, AI and machine that will fuel growth. The deployment of 5G technology — the next wireless revolution — is creating further opportunities. The wave of mergers and acquisitions is also providing further impetus to the space.
As such, investors should take advantage of the beaten down prices. For them, we have highlighted some solid ETF picks that were in red over the past month but have a solid upside potential. All these have a Zacks Rank #1 (Strong Buy) or 2 (Buy).
SPDR S&P Internet ETF XWEB – Down 10.1%
This product targets the Internet corner of the broad tech space and follows the S&P Internet Select Industry Index. It charges 35 bps in annual fees and trades in a volume of 6,000 shares. With AUM of $27.8 million, the fund holds 44 stocks in its basket and carries a Zacks ETF Rank #2 (read: 5 Beaten Down ETFs & Stocks to Buy Now).
iShares North American Tech-Multimedia Networking ETF IGN — Down 9.8%
This ETF provides exposure to telecom equipment, data networking and wireless equipment companies by tracking the S&P North American Technology-Multimedia Networking Index. It holds 22 securities in its basket and has accumulated $111.2 million in its asset base. Expense ratio comes in at 0.46%. The product sees a lower volume of around 49,000 shares a day and carries a Zacks ETF Rank #1 with a High risk outlook
Invesco Dynamic Networking ETF PXQ – Down 8.2%
This fund follows the Dynamic Networking Intellidex Index and offers exposure to 30 companies that are principally engaged in the development, manufacture, sale or distribution of products, services or technologies that support the flow of electronic information, including voice, data, images and commercial transactions. The fund is relatively unpopular and illiquid in the broad technology space with AUM of $64.2 million and average daily volume of about 14,000 shares. It charges 63 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook (read: ETFs in Focus on Cisco's Acacia Buyout Deal).
First Trust Dow Jones Internet Index FDN – Down 7.8%
This ETF tracks the Dow Jones Internet Composite Index, which includes only companies whose primary focus is Internet related. It is one of the most-popular and liquid ETFs in the broad tech space with AUM of $8.1 billion and average daily volume of around 490,000 shares. The fund holds 42 stocks in its basket and charges 52 bps in fees per year. It has a Zacks ETF Rank #2 with a High risk outlook.
John Hancock Multi-Factor Technology ETF JHMT – Down 5.7%
This fund focuses on the time-tested multifactor approach that emphasizes factors (smaller cap, lower relative price, and higher profitability) that academic research has linked to higher expected return. It follows the John Hancock Dimensional Technology Index, holding 126 stocks. The fund has accumulated $56.4 million in AUM while charging 40 bps in fees per year. Volume is light at around 7,000 shares a day. JHMT has a Zacks ETF Rank #2 with a High risk outlook (read: Tech ETFs Brush Aside Antitrust-Led Slump to Hit Highs).
First Trust NASDAQ-100 Technology Sector Index Fund QTEC – Down 5.6%
This ETF follows the NASDAQ-100 Technology Sector Index, holding 39 stocks in its basket. It has amassed $2.4 billion in its asset base while trades in average daily volume of 199,000 shares. The fund charges 57 bps in annual fees and has a Zacks ETF Rank #2 with a High risk outlook.
VanEck Vectors Semiconductor ETF SMH – Down 5.6%
This fund targets the semiconductor corner of the broad tech space by tracking the MVIS US Listed Semiconductor 25 Index. It is a home to 25 securities and trades in average daily volume of 6.8 million shares. The product has managed assets worth $1.4 billion and charges 35 bps in annual fees and expenses. It has a Zacks ETF Rank #2 with a High risk outlook.
iShares Expanded Tech-Software Sector ETF IGV – Down 5.4%
This ETF provides exposure to software companies in the technology and communication services sectors by tracking the S&P North American Expanded Technology Software Index. The fund holds a basket of 99 securities and charges 46 bps in annual fees. It is popular with AUM of $2.7 billion and volume is good as it exchanges nearly 512,000 shares a day. The product has a Zacks ETF Rank #1 with a High risk outlook.
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Click to get this free report SPDR S&P Internet ETF (XWEB): ETF Research Reports VanEck Vectors Semiconductor ETF (SMH): ETF Research Reports iShares Expanded Tech-Software Sector ETF (IGV): ETF Research Reports Invesco Dynamic Networking ETF (PXQ): ETF Research Reports First Trust Dow Jones Internet Index Fund (FDN): ETF Research Reports iShares North American Tech-Multimedia Networking ETF (IGN): ETF Research Reports John Hancock Multifactor Technology ETF (JHMT): ETF Research Reports First Trust NASDAQ-100-Technology Sector Index Fund (QTEC): ETF Research Reports To read this article on Zacks.com click here. Zacks Investment Research Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report