Apple (AAPL) has acted as shining beacon in the tech sector, providing some sense of stability in technology-related exchange traded funds.
Shares of Apple stocks jumped following a strong second quarter earnings result and on plans to offer an additional $30 billion in share buybacks. The company recently broke above the $600 level for the first time since late 2012.
Apple’s strength has also helped lift broad tech sector ETFs. The company makes up a significant weight in market capitalization-weighted tech ETFs. For instance, the iShares U.S. Technology ETF (IYW) has the largest weight in AAPL shares at close to 18.0% of the overall portfolio.
Additionally, the tech ETF includes other old and established technology names, including a 10.0% weight in Microsoft (MSFT), 6.3% in International Business Machines (IBM), 4.6% in Oracle (ORCL), 4.5% in Qualcomm (QCOM) and 4.4% in Intel (INTC). [Your Grandparents Would Like This Tech ETF]
“IYW has a very high-quality portfolio–wide-moat and narrow-moat firms account for about 50% and 36% of the portfolio, respectively, meaning that Morningstar’s equity analysts believe that 86% of IYW’s assets are invested in firms with sustainable competitive advantages,” according to Morningstar analyst Robert Goldsborough.
While tech companies and other momentum plays fell over the past month, IYW has gained 0.3%. The ETF is up 1.8% year-to-date.
To put this in perspective, an equal-weight tech ETF, the Guggenheim S&P 500 Equal Weight Technology ETF (RYT) , which only has a 1.8% weight in AAPL, has declined 1.7% over the past month and is up 1.3% year-to-date.
IYW’s allocations toward larger tech names also helped the ETF weather the volatility, especially when compared to the major sell-off in tech 2.0 social media names and the Global X Social Media Index ETF (SOCL) , which has plunged 20.7% year-to-date. [Momentum Savagery: Internet, Social Media ETFs Bludgeoned Again]
For more information on the tech sector, visit our technology category.
Max Chen contributed to this article. Tom Lydon’s clients own shares of Apple and Microsoft.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. 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.