Internet ETFs: Networking and Broadband Capitalize on Obama's Stimulus Plans

The broader U.S. market (S&P 500) was down 6.5% in January 2009. And you may be even harder pressed to find an international stock ETF that is "better off."

However, some segments of the U.S economy have shone a bit brighter. Credit the earnings reports of Apple (AAPL), Google (GOOG), IBM (IBM) and perhaps Sun Micro (JAVA) for something short of optimism (i.e., less pessimism).

Dig deeper... and you'll actually find sub-segment ETFs like iShares GS Networking (IGN) with gains through 1/29/09. Not far behind, Broadband HOLDRs (BDH) is actually flat on the year.

While I have written about these areas extensively in previous posts, I may have underestimated the impact of "recession politics." More specifically, President Obama has been vocal about his intentions to stimulate the economy through the expansion of information technology. And the stimulus package before Congress reflects the reality.

Even after a monumental sell-off on Thursday, 1/29/09, which may not be reflected in the chart below, the iShares GS Networking Fund (IGN) is still up 4.1% YTD. Broadband (BDH) sports a 0% return due to Friday's shellacking of Qualcomm; however, tech infrastructure investments have still outpaced the market at large.

Back in November, I offered a packet to readers describing 5 of the Best ETFs for an Obama administration. The iShares Networking Fund (IGN) was at the top of the list.

One of the reasons? Recession stimulus spending on communication and information services.

And there was another reason, albeit a bit more cynical. Cisco as well as the co-founder of Sun Micro ranked atop the leader board for donations to the Obama campaign. One certainly can consider which business types donated to which candidate.

So let's review:

1. The current stimulus package intends to spend hundreds of billions to increase broadband access for schools, healthcare professionals, libraries and hospitals.

2. Companies like Cisco (CSCO), Juniper (JNPR), Corning (GLW), Sun (JAVA), Google (GOOG) and Qualcomm (QCOM) stand to benefit the most from upgraded/modernized tech infrastructure. They strongly supported Obama, and President Obama strongly believes that America's success is tied to our country's leading Internet players.

3. $7000 dollars would have given you the ownership rights to 200 shares of iShares Networking Fund (IGN) at the start of this bear. The same money gets you 400 shares today.

Even with profits falling dramatically in the recession, prices for the sector have likely been falling faster than earnings. And when the economy itself begins turning a corner... earnings may soar. By then, it may be a little late to hop aboard the networking express.

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