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Tech ETFs to Give Thanks Amid Bloodbath

FAANG stocks have seen recurring episodes of tumult this year. The issue started with the Facebook FB stock rout in mid-March on reports of data breach.

To make matters worse, the failure of NVIDIA NVDA’s self-driving car tests, short selling pressure on Twitter on reports of stricter social media regulations, overvaluation in Netflix and Trump’s attack on Amazon over antitrust or competition laws proved damaging.

The European Commission’s plans to target Silicon Valley’s tech titans with a renewed tax scheme and the trade war with China also exerted pressure on the space. Tech companies have extensive trade relations with China and are thus at high risk in wake of a trade war (read: 5 Sector ETFs Most Exposed to Trade Tensions).

Though the space recovered in the middle of the year on fundamental strength, rising rate and overvaluation concerns had a crushing effect on big tech names in early October. Technology stocks were hit hard on Oct 10, logging their worst day in more than seven years.

Since then, the sector has been on a volatile ride with another blow dealt on Nov 19. Technology Select Sector SPDR ETF XLK lost about 3.8% on the day as investors dumped high-flying names like Apple AAPL and Facebook (read: Apple Woes Trigger Tech Sector Rout: ETFs Under Threat).

News of Apple lowering iPhone production and “a WSJ report that CEO Mark Zuckerberg is becoming much more aggressive in how he manages the tech giant” devastated the technology sector.

Apple shares were down about 4% and Facebook lost about 5.7% on Nov 19. Plus, Nvidia’s shares were hit by a downbeat earnings report. Tech-heavy Nasdaq retreated about 3.3% on the day (read: NVIDIA Crashes on Dismal Outlook: Should You Buy Its ETFs?).

Overall, the year has been a capricious one for the space with the key tech ETF XLK adding only 1.3% (as of Nov 19, 2018). Against this backdrop, we highlight a few tech ETFs that have gained considerably this year and have beaten XLK.

Invesco Dynamic Software ETF PSJ — Up 12.0% YTD (as of Nov 19, 2018)

The underlying index comprises stocks of software companies. The Index picks companies based on a variety of investment merit criteria, including fundamental growth, stock valuation, investment timeliness and risk factors. It charges 63 bps in fees. However, the fund was down 6.7% on Nov 19.

iShares North American Tech-Software ETF IGV – Up 9.3%

The index gives exposure to companies that are producers of client/server, enterprise software, Internet software, PC and entertainment software. It charges 47 bps in fees.

ETFMG Prime Cyber Security ETF HACK — Up 7.4%

The underlying index gives exposure to a diverse group of companies actively involved in the cyber security industry. The expense ratio of the 52-stock fund is 0.60%.

First Trust ISE Cloud Computing Index Fund SKYY – Up 7.4%

The underlying tracks the performance of companies actively involved in the cloud computing industry. The fund charges 60 bps in fees (read: Tech ETFs in Focus on Oracle's Mixed Bag Q1 Results).

Invesco Dynamic Networking ETF PXQ – Up 7.4%

The underlying looks to evaluate companies based on fundamental growth, stock valuation, investment timeliness and risk factors. The 29-stock fund charges 63 bps in fees.

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Facebook, Inc. (FB) : Free Stock Analysis Report
 
Apple Inc. (AAPL) : Free Stock Analysis Report
 
FT-CLOUD COMPUT (SKYY): ETF Research Reports
 
ISHARS-NA TEC-S (IGV): ETF Research Reports
 
PURFDS-ISE CYBR (HACK): ETF Research Reports
 
PWRSH-DYN NTWRK (PXQ): ETF Research Reports
 
SPDR-TECH SELS (XLK): ETF Research Reports
 
NVIDIA Corporation (NVDA) : Free Stock Analysis Report
 
PWRSH-DYN SFTWR (PSJ): ETF Research Reports
 
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