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Tech ETF ‘VGT’ Could Keep Soaring if Microsoft, Apple Deliver on Earnings

This article was originally published on ETFTrends.com.

The Vanguard Information Technology ETF (VGT) has been a prime beneficiary of the index it tracks, the MSCI US Investable Market Index/Information Technology 25/50, and it can continue to soar, particularly if its two largest holdings, Microsoft and Apple, can deliver on earnings.

Based on Yahoo! Finance performance numbers, VGT has been performing admirably--up 10.64% year-to-date, 30.12% the past year (beating similar benchmarks in its category by almost 20%) and 21.25% the past three years. Looking at the YTD chart, it has never dropped below its 200-day moving average.


This Tech ETF Continues to Soar 1

Microsoft, Apple Earnings

Apple Inc comprises the majority of VGT's holdings at 15.31% and Microsoft comes in second at 11.75%. Both companies are expected to report earnings, starting with Microsoft this Thursday and Apple on July 31 after the U.S. markets close.

For Microsoft's fourth-quarter fiscal 2018 results, early projections show a rise in quarterly sales to $29.17 billion, based on consensus estimates from Zacks--an 18.1% increase from the previous year. Historically, Microsoft has a positive record of earnings, particularly in the last four quarters, beating consensus estimates by an average of 19.5%.

Last quarter, Microsoft posted earnings of $0.95 per share, beating the Zacks Consensus Estimate by $0.10. In addition, revenues of $26.82 billion increased by almost 15.5% from the previous year. Microsoft's stock has been up 43.8% the past year and 23.4% year-to-date.

For Apple, reporting their fiscal year third quarter results, analysts are projecting consensus revenues of $52.3 billion--a year-over-year increase of about 16%--its highest rate since October 2015. EPS consensus estimates are pegged at $2.18. Like Microsoft, Apple shares have climbed, gaining 27.4% the past year and 11.1% year-to-date.

Related: Technology ETFs Lead The Charge in 2018

Institutional Investor Activity

VGT is also experiencing activity from institutional investors, such as Beacon Capital Management and Daiwa Securities Group Inc. Per Fairfield Current, Beacon Capital "owned 1,194,885 shares of the exchange traded fund’s stock after selling 32,431 shares during the period. Vanguard Information Technology ETF comprises about 9.2% of Beacon Capital Management Inc.’s holdings, making the stock its 2nd largest holding. Beacon Capital Management Inc. owned approximately 1.05% of Vanguard Information Technology ETF worth $216,752,000 at the end of the most recent quarter."

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