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ETFs in Focus as Microsoft Races Past Apple

Microsoft MSFT surpassed Apple AAPL on Nov 26 to be the most-valuable publicly traded company. Though it happened for a brief period of time, there could be some possible indications for investors going forward. This happened for the first time in eight years. The market value of the company reached $812.93 billion followed by Apple’s $812.6 billion during trading hours. The last time Microsoft finished as the most-valued company at the end of the year was in 2002, per Bloomberg. The stock of the company closed trading around 3% up.

Technology shares have borne the brunt of rising rates and escalating trade tensions between Beijing and Washington.  It was just four months ago that the iPhone maker became the first trillion-dollar company buoyed by a strong rate of growth in the last five years. However, the recent tech sell-off and company-centric issues made the company lose some sheen (read: What Tech Crash? Tap Online ETFs for Black Friday & Beyond).

Microsoft wasn’t immune to the wild downswings in the recent tech sell-off. However, shares of the company have fallen about 8% since the end of September in comparison to 22% for Amazon AMZN and 25% for Apple. The success of Azure cloud-computing service has lured investors toward the company. Microsoft valuations surpassed Google GOOGL earlier this year and surged ahead of Amazon last month.

In comparison to Apple and Amazon, which have heavy reliance on one particular source of revenues, Microsoft derives its income from various sources insulating it from the concentration risk. Nearly 86% of revenues are derived from advertisements for Google while around 60% of Apple’s revenues are contributed by iPhone sales. However, in case of Microsoft, the combination of Windows, Xbox, and Surface division contribute to 36% of revenues (read: Can Cyber Monday Save Apple ETFs?).

In Feb 2014, Satya Nadela was named the CEO of the company. During this time, shares were floating in the range of $37-38. Presently, shares are trading at 2.9 times higher than that.

Microsoft has been smart in its approach as it is focused on its strengths and tried to capitalize on corporations’ desire to help navigating technology changes. The company has given a re-touch to its products to make it more appealing. Alongside, its cloud computing division, the company has also generated robust returns from its office software packages and database technology.

Microsoft is now focusing to secure the future of quantum computing and mixed reality computing, wherein it faces competition from giants like Google, Apple, Amazon and Facebook FB. Investors seeking to bet on the strength in this software leader could definitely look into the following five ETFs having double-digit exposure to Microsoft (see: all the Technology ETFs here):

Select Sector SPDR Technology ETF XLK

The fund tracks the Technology Select Sector Index and comprises 67 holdings. Microsoft occupies the first position with 18.2% weight. The fund’s AUM is $18.2 billion and expense ratio is 0.13%.

iShares Dow Jones US Technology ETF IYW

The fund tracks the Dow Jones US Technology Index, giving investors exposure to 151 technology stocks. Of these, Microsoft occupies the second position in the basket with 15.7% of assets. The fund’s AUM is $3.5 billion and expense ratio is 0.43% (read: Tech ETFs to Give Thanks Amid Bloodbath).

Vanguard Information Technology ETF VGT

The fund tracks the MSCI US Investable Market Information Technology 25/50 Transition Index and comprises 321 holdings. Of these, Microsoft occupies the second position (14.5%). The fund’s AUM is $18.6 billion and expense ratio is 0.10%.

iShares Global Tech ETF IXN

The fund tracks the S&P Global Information Technology Sector Index. It comprises 113 holdings with Microsoft sitting at the second spot (14.2%). The fund’s AUM is $2.4 billion and expense ratio is 0.47%.

Fidelity MSCI Information Technology Index ETF FTEC

The fund tracks the MSCI USA IMI Information Technology Index. It comprises 340 holdings with Microsoft holding the second spot (11.9%). The fund’s AUM is $2 billion and expense ratio is 0.08%.

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