Technology ETFs: How Exposed to the RIM Effect?

How often have you read that the S&P 500 climbed 58%+ off of the March lows? More times than you can probably count, right!

You may also have heard that Tech ETFs have catapulted significantly more than 58% off of the canvas. Since 3/9/09, PowerShares Nasdaq 100 (QQQQ), SPDR Morgan Stanley Technology (MTK) and iShares GS MultiMedia-Networking (IGN) are up 60%, 80% and 93% respectively.

The semi-miraculous moves are due in large part to Research In Motion (RIMM). The BlackBerry producer has rocketed 137% in the same time period.

That said, RIMM’s quarterly results and subsequent guidance were entirely uninspiring on 9/24/09. Profitability, new subscribers, and future forecasts were lower than anticipated… suggesting that companies may delay upgrading employee handsets and consumers may opt for less feature-rich “smart-phones.”

Is one of the paragons of “get-it-right” technology in trouble? And if so, how much exposure does your Tech ETF have to Research in Motion?

Tech ETFs: Exposure to Research in Motion (RIMM)
				Weighting		YTD Gains (Through 9/18)
iShares GS Multimedia-Networking (IGN)				6.4%		61.4%
SPDR Morgan Stanley Tech Index (MTK)				3.7%		58.4%
PowerShares Nasdaq 100 (QQQQ)				3.2%		42.7%
iShares Global Tech Sector Fund (IXN)				1.8%		41.8%
SPDR Select Technology (XLK)				0.0%		35.6%

Clearly, on the way up, the more RIMM exposure... the better. The 6.4% weighting on the BlackBerry makers inside of iShares MutliMedia Networking (IGN) contributed handsomely to one of the finest bounces off the March flooring as well as the highest YTD return.

However, the market giveth... and the market may takeith away. If 9/24/09 after hours are any indication of tech sector woes for 9/25, IGN and MTK stand to lose the most.

Nevertheless, in the grand scheme, the RIMM effect is rather small; that is, even the highest weighting is small enough that IGN itself is well diversified in the particular space. More concern should center on the Apple (AAPL) effect. After all, it represents a whopping 15% of the PowerShares Nasdaq 100 (QQQQ)!

Disclosure Statement: Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC, may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

Comments

[dea_sys:]

Why should an ETF investor be "concerned" about the Apple effect? Pleased is more like it...with more good news yet to come.

Sep 25 04:05 PM

[GoochyPuppy:]

Any extreme price movements in a stock (good or bad) are cause for a concern, unless your ETF collection is very well timed.

Sep 25 07:21 PM

[brewer:]

RIM goes up on nothing. Or, at best, weak, unsuccessful imitation of Apple and 2 for 1 barnburner sales where they make no profit. Blackberries are 90's tech, sold to businesspeople to think they understand technology and only actually use email. It's not surprising they have to give them away (ala Windows) in order to make people feel better about using outmoded, totally outclassed hardware/software.

Sep 28 03:01 PM