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Tech ETFs in Focus on Record Apple iPhone Sales

Zacks Equity Research

Technology giant, Apple Inc. (AAPL) surprised the market with record sales of two new iPhones– 5C and 5S. While the stock reacted negatively to the launch of the handsets citing the pricing concern, the company’s stock jumped about 5%, the highest since July, on the news of the solid sales.
Bullish iPhone Numbers
The company sold nine million of the new iPhones models in the first three days on the market. This is nearly double than the five million iPhone 5 sold in the first three days a year ago, and up from the Wall Street estimate of six million.
Apple, for the first time, rolled out the two new iPhone models in China on the same day rather than delaying for three months. This move has benefited the company, as about 15% of the total iPhone sales come from China (read: Buy This Top Ranked Tech ETF Now). 
The robust numbers led to optimism in the company’s financials forecast for the fourth quarter. The ubiquitous gadget-maker raised its quarterly sales and gross margin outlook to the upper end of the previous guidance of $34–$37 billion and 36–37%, respectively.
Analysts have already started to raise their earnings projections for the company based on this news. The bullish trend is also expected to continue into the ETF space in the coming days.
Below, we have highlighted three tech ETFs that are heavily invested in this technology company and could be the ones to watch out for ahead of Q3 earnings season (see: all the Technology ETFs here):
iShares Dow Jones US Technology ETF (IYW)
This ETF tracks the Dow Jones US Technology Index, giving investors exposure to the broad technology space. The fund holds over 130 stocks in its basket with AUM of $2.6 billion while charging 46 bps in fees and expense.
Apple occupies the top position in the basket with 16.84% of assets. The product is heavily skewed towards the technology hardware and equipment segments, as these make up for more than half of the portfolio. Software and computer services take the remaining portion in the basket.
The fund added about 1.6% over the past five-day period and 13.4% in the year-to-date time frame (read: Tech ETFs To Watch After Solid Apple Earnings). The product has a Zacks ETF Rank of 3 or ‘Hold’ with a ‘High’ risk outlook.
Select Sector SPDR Technology ETF (XLK)
The most popular technology ETF on the market, XLK follows the Technology Select Sector Index, and has amassed about $11.8 billion in its asset base. The fund charges 18 bps in fees per year from investors.
In total, the fund holds about 75 securities in its basket. Of these firms, AAPL takes the first spot, making up roughly 13.68% of the assets. In terms of industry exposure, the fund is widely spread across computer & peripherals, IT services, software, Internet software & services and diversified telecom services, that make up for double-digit allocation (read: 3 Internet ETFs Leading the Tech World Higher).
The fund returned over 13.7% so far this year and 0.9% in the past five-day period. XLK currently has a Zacks ETF Rank of 3 or ‘Hold’ with a ‘Medium’ risk outlook.
Vanguard Information Technology ETF (VGT)
This fund manages a $3.9 billion asset base and provides exposure to a large basket of 416 technology stocks by tracking the MSCI US Investable Market Information Technology 25/50 Index (see more in the Zacks ETF Center).
Here again, AAPL is the top firm with a 14% allocation while others do not hold more than 8.2% of assets. This suggests that the performance of the fund is highly dependent on Apple’s performance. From a sector perspective, computer hardware takes the top spot at 16.40% while internet software & services and system software round off to the next two spots with at least 14% each.
VGT added 1.8% in the trailing five trading sessions and has returned nearly 18% year-to-date. The fund has a Zacks ETF Rank of 1 or ‘Strong Buy’ with a ‘Low’ risk outlook, and thus could be a solid pick for investors seeking to play the tech sector this year.

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