Get Exposure to Earnings Superstars with Broad-Based Tech ETFs

About a week after the March 2009 “bottom,” one of the most critical components for stock ETFs going forward had been ownership of cash-rich companies. While I didn’t advocate “cash on hand” as a stand-alone indicator, I did suggest that it was impossible to ignore the financial strength of big-cap tech.

In fact, of the 15 companies with the most “cash” to gobble up small fries, buyback shares, invest in R&D or just plain survive the credit crisis, 5 of the companies were well-known tech giants. They included Google (GOOG), Intel (INTC), Microsoft (MSFT), Cisco (CSCO) and Apple (AAPL).

The earnings for Google, Intel and Apple have already been released; the results have been described as stellar and the major benchmark indexes have responded by surging to 52-week highs.

With Apple gaining 6% in after-hours on Monday, 10/19, things are looking less bleak for bulls. The PowerShares (QQQQ), a proxy for the Nasdaq 100, is also up 0.80% in after-hours trading.

Still, how might a tech believer capitalize? Is it too late… or will more good news from the likes of Microsoft, Cisco and others propel tech ETFs higher and higher?

If you like the guidance from Apple, Google and Intel, you’re going to like the iShares Goldman Tech Index Fund (IGM). All 5 of the aforementioned, cash-rich companies are accounted for in the top 10 holdings of IGM. What’s more, they collectively account for 1/3 of IGM’s performance.

If you’re looking for a unique tech play that captures other tech names in the Nasdaq 100, while still allowing for the Apples and Intels of the world, the First Trust Nasdaq 100 Tech Sector (QTEC) has exceeded many performance hurdles. Its low volume makes it an undesirable trading candidate, but if your intention is to hold for years, you might look for a down day to get a favorable price execution.

Full Disclosure: Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. The company may hold positions in the ETFs, mutual funds and/or index funds mentioned above.

Comments

[margel:]

Any thoughts on NASDX? How does it compare to QTEC and IGM?

Oct 20 12:00 PM