U.S. Markets open in 8 hrs 41 mins

Google’s Ascent is Powering This ETF Higher


Is it possible for a stock to have a market value north of $301 billion, a year-to-date gain of 25.6% and still not find significant representation among ETFs? Yes, it is. Such is life for Internet search giant Google (GOOG).

Despite those lofty accolades, Google is arguably under-represented within broad market and sector ETFs. Few funds feature a double-digit allocation to the darling stock, but one that does is benefiting in a big way.

The First Trust Dow Jones Internet Index Fund (FDN) has previously benefited from Google surges. This time around is no different. [Google Rally Lifts, Tech Nasdaq ETFs]

FDN, which turns seven years old in three weeks, allocates 10.3% of its weight to Google, making the stock the ETF’s largest constituent by almost 340 basis points over number two holding Amazon.com (AMZN).

Perhaps one reason Google is not a dominant presence in more ETFs is because there are not many pure-play Internet ETFs on the market. FDN is the dominant name in the Internet ETF space and that position has only been bolstered by Google’s stellar 2013 performance. [ETF Spotlight: Internet Sector]

As of May 17, FDN had over $1 billion in assets under management, though little fanfare has been paid to the ETF reaching that milestone. Impressively, the ETF has raked in $320.6 million in fresh assets this year, according to Index Universe data. Said differently, more than 32% of FDN’s current asset base has trickled in in less than five months. In May alone, the ETF has attracted almost $18 million in new assets.

FDN tracks the Dow Jones Internet Composite Index. In addition to Google and Amazon, the ETF’s other top-10 holdings include an assortment of other high-flying, high-beta names that could benefit from a cyclical rotation. That group includes eBay (EBAY), Priceline (PCLN) and Netflix (NFLX). [Two ETFs For A Cyclical Rotation]

The Dow Jones Internet Composite Index has outpaced the S&P 1500 Information Technology Index year-to-date, over the past year, three years and five years. However, FDN’s index does sport a slightly higher beta of 1.15 compared to 1.11 for the S&P 1500 Information Technology Index, according to First Trust data.

Investors looking for ETF alternatives to FDN for Google exposure can consider the PowerShares NASDAQ Internet Portfolio (PNQI). Google is that ETF’s second-largest holding with a weight of about eight percent. The iShares Dow Jones U.S. Technology Sector Index Fund (IYW) , an ETF best known for its significant allocation to Apple (AAPL), features a 9.2% weight to Google. [Nasdaq, Tech ETFs Capitalize on The Apple Brand]


Full disclosure: Tom Lydon’s clients own GOOG.

ETF Trends editorial team contributed to this story.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.