The FANG stocks – Facebook Inc. (FB) , Amazon.com Inc. (AMZN) , Netflix Inc. (NFLX) and Google parent Alphabet Inc. (GOOG) – remain in focus, prompting some investors to look to exchange traded funds (ETFs) as a way of accessing the entire FANG quartet in a single trade.
The First Trust Dow Jones Internet Index Fund (FDN) , the largest Internet ETF trading in the U.S., is one of the premier avenues to the FANG stocks among ETFs.
“A market cap-weighted index of Facebook, Amazon, Netflix and Google has surged 31% this year, more than triple the S&P 500 , and 11 percentage points more than the already tech-heavy Nasdaq 100. And that dominance looks poised to continue, with tech companies expected to be among the champions of earnings seasons through year-end,” reports Business Insider .
Although FDN is not a dedicated FANG ETF, its weight to those four stocks is significant as the FANG quartet represents about a third of the fund’s weight. While there is no dedicated FANG ETF, a new actively managed ETF targets the FANG phenomenon and related companies. The AdvisorShares New Tech and Media ETF (FNG) debuted last week.
The New Tech and Media ETF will try to generate long-term capital appreciation by investing in technology and media companies, including innovative and fast-growing technologies such as social media companies and internet retail companies. The active ETF will also concentrate its investments in the software and services industry within the information technology sector .
FDN “has surged 189% over the past five years, through Tuesday. That far outpaces the 122% increase in the PowerShares QQQ Trust Series ETF, the biggest tech-focused fund, as well as the 79% gain enjoyed by the benchmark S&P 500 over the same period,” according to Business Insider. “It already appears as if traders have caught on to some degree, with FDN swelling in size to become the third-largest tech ETF.”
FDN’s primary rival is the PowerShares NASDAQ Internet Portfolio (PNQI) . PNQI tracks the largest and most liquid U.S.-listed companies engaged in internet-related businesses and employs a modified market cap-weighted indexing methodology based on the market cap ranking of the underling idnex securities.
Related: Strong Corporate Earnings Help Push U.S. Stock ETFs to New Heights
The new, aforementioned FNG could give FDN a run for its money as well.
Unlike traditional beta-index strategies, “actively managed aspect of FNG allows for evolution and relevance, as opposed to the constraints and staleness that can follow index-based ETFs,” according to AdvisorShares.
Tom Lydon’s clients own shares of Alphabet and Facebook.
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.
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