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Profit From Apple's Big Plans With These ETFs

Zacks Equity Research
FB Financial (FBK) doesn't possess the right combination of the two key ingredients for a likely earnings beat in its upcoming report. Get prepared with the key expectations.

Apple Inc AAPL announced that it plans to bring most of the $252.3 billion offshore cash back to the United States, following President Donald Trump’s tax reform. The repatriation is expected to generate a one-time tax payment of $38 billion.

Moody’s Investors Service estimates that approximately $1.6 trillion is held in offshore accounts by American companies, excluding banks and financial services companies. Trump’s tax reform provides companies with an incentive to bring cash held offshore back to the U.S. by providing them with a one-time tax break on the profits they bring back this year, taxing foreign profits at 15.5% this year (read: 3 Apple ETFs for Cyber-Monday And After).

Into The Plan Specifics

The tech behemoth plans to make a $350 billion contribution to the U.S. economy over the next five years, while spending $30 billion in capital expenditures and also adding 20,000 jobs to its already huge workforce. "This is great news for the American economy and for America's workers", House Speaker Paul Ryan said (read: 8 Power-Packed ETFs for 2018).

Coming to the impact on shareholders, multiple analysts believe that Apple’s latest plans are expected to provide the company with more flexibility when announcing share buybacks and dividends. Per an Apple Insider article, venture capital firm Loup Ventures expects Apple to increase its spending on buyback and dividends to $125-$150 billion through 2020.

Moreover, some analysts are predicting that Apple will spend some of the offshore cash to diversify its revenue stream and reduce its dependence on iPhone sales. As a result, bets are being placed on Apple increasing its Research and Development spending and eyeing potential mergers and acquisitions.

In the current scenario, we believe it is prudent to discuss the following ETFs that focus on providing exposure to Apple (see all Technology ETFs here).

Technology Select Sector SPDR Fund XLK

XLK is a relatively cheaper bet on the technology sector. This fund has AUM of $21.0 billion and charges a fee of 14 basis points a year. From a sector look, Software, Internet Software and Services and Technology Hardware Storage & Peripherals have the highest exposure to the fund, with 20.5%, 18.8% and 16.7% allocation, respectively (as of Dec 31, 2017). Apple Inc, Microsoft Corp MSFT and Facebook Inc FB are the top three holdings of the fund, with 14.6%, 11.1% and 6.9% allocation, respectively. The fund has returned 39.0% in a year. XLK currently has a Zacks ETF Rank of #2 (Buy) with a Medium risk outlook.

iShares U.S. Technology ETF IYW

This fund provides exposure to the U.S. technology sector. It has AUM of $4.3 billion and charges a fee of 44 basis points a year. From a sector look, Software & Services, Technology Hardware & Equipment and Semiconductors & Semiconductor Equipment have the highest exposure to the fund, with 53.3%, 25.9% and 19.4% allocation, respectively (as of Jan 19, 2018). Apple Inc, Microsoft Corp and Facebook Inc are the top three holdings of the fund, with 16.9%, 12.8% and 8.0% allocation, respectively.  The fund has returned 41.3% in a year. IYW currently has a Zacks ETF Rank of #1 (Strong Buy) with a Medium risk outlook.

Vanguard Information Technology ETF VGT

This fund is one of the most popular bets on the technology sector in the U.S. It has AUM of $18.7 billion and charges a fee of 10 basis points a year. From a sector look, Internet Software & Services, Technology Hardware, Storage & Peripherals and Systems Software have the highest exposure to the fund, with 19.8%, 15.9% and 14.3% allocation, respectively. Apple Inc, Alphabet Inc GOOGL and Microsoft Corp are the top three holdings of the fund, with 13.9%, 10.2% and 9.9% allocation, respectively.  The fund has returned 42.5% in a year. VGT currently has a Zacks ETF Rank of #2 with a Medium risk outlook.

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Facebook, Inc. (FB) : Free Stock Analysis Report
 
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
Microsoft Corporation (MSFT) : Free Stock Analysis Report
 
SPDR-TECH SELS (XLK): ETF Research Reports
 
VIPERS-INFO TEC (VGT): ETF Research Reports
 
ISHARS-US TECH (IYW): ETF Research Reports
 
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