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ETFs in Focus After IBM's Q3 Earnings

Sweta Killa

After the closing bell on Oct 16, International Business Machines IBM reported mixed third-quarter 2019 results.

Earnings per share came in at $2.68, surpassing the Zacks Consensus Estimate of $2.64 and the year-ago earnings of $3.42. Revenues fell 3.9% year over year to $18.03 billion, marking the fifth consecutive quarter of sales decline. It missed the consensus estimate of $18.24 billion (read: ETFs in Focus as IBM Gears Up to Report Q3 Earnings).

Investors were disappointed with respect to IBM’s $34 billion Red Hat acquisition completed in July that did not meet their expectations. Red Hat revenues are unlikely to turn around the fortunes of the company after years of revenue decline amid shift to cloud from its traditional businesses, including mainframe servers. However, the company said it expects sustainable revenue growth in 2020 after more than a year of decline.

The world’s largest computer-services provider reiterated its full-year earnings projection of “at least $12.80” a share.

Shares of IBM tumbled more than 5% in after-market hours. The stock has a Zacks Rank #3 (Hold) and boasts a top Value Score of A. It also belongs to a top-ranked Zacks industry (top 33%) (see: all the Technology ETFs here).

ETFs to Watch

Given this, ETFs with the highest allocation to this tech giant will be in focus. Investors should closely monitor the movement of these funds and grab the opportunity whenever it arises or avoid if the stock weighs them down in the days ahead.

First Trust NASDAQ Technology Dividend Index Fund TDIV

This fund provides exposure to dividend payers within the technology sector by tracking the Nasdaq Technology Dividend Index. The product has amassed about $1 billion in its asset base while trading in volume of around 86,000 shares per day. It charges 50 bps in annual fees and holds about 93 securities in its basket. Of these firms, IBM takes the third spot, making up roughly 8.2% of the assets.

Invesco Dow Jones Industrial Average Dividend ETF DJD

This ETF offers exposure to high-yielding companies included in the Dow Jones Industrial Average by their 12-month dividend yield over the prior 12 months. It holds 30 stocks in its basket, with IBM occupying the third position with 5.8% allocation. DJD has been able to manage assets worth $83.6 million, while trading in volume of 21,000 shares a day on average. It charges 7 bps in annual fees and has a Zacks ETF Rank #3 (Hold) (read: Will Q3 Earnings Drive Dow ETF Higher?).

WBI Power Factor High Dividend ETF WBIY

This ETF offers exposure to quality stocks that have the highest dividend yield with a deep value bias and multi-factor fundamental analysis. It follows the Solactive Power Factor High Dividend Index, holding 51 stocks in the basket with IBM taking the sixth spot at 4.6%. The product has amassed $91.8 million in its asset base and trades in lower volume of 26,000 shares a day on average. It charges 70 bps in annual fees.

Schwab U.S. Dividend Equity ETF SCHD

With AUM of $10.4 billion, this product offers exposure to 110 high dividend yielding U.S. companies that have a record of consistent dividend payments supported by fundamental strength based on financial ratios and ample liquidity. This can be easily done by tracking the Dow Jones U.S. Dividend 100 Index. IBM occupies the ninth position in the basket with 4.2% share. The fund trades in solid volume of 738,000 shares a day and is one of the low cost choices in the dividend space, charging 6 bps in fees per year. It has a Zacks ETF Rank #3 with a Medium risk outlook (read: Dividend ETFs to Grab as Fed Cuts Rates Once Again).

Tortoise Cloud Infrastructure Fund TCLD

This ETF offers exposure to companies that have the potential to benefit from the expected growing investments, rapid adoption and fast paced innovation of the cloud industry by tracking the Tortoise Global Cloud Infrastructure Index. It holds 46 securities in its basket with IBM taking the eight spot at 4.5% share. TCLD has been able to gather $4 million in its asset base since its debut in January and sees lower volume of nearly 500 shares. It charges 40 bps in annual fees.

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