Google (GOOG), the world leader in online search, has frequently been in the news as of late. With the announcement of their new open source phone, the Nexus One, and their threat to leave China over censorship concerns, it has been a very tumultuous quarter for the search giant. The rocky year continued late Thursday as shares of Google slumped more than 5% in after hours trading, sending shares lower by close to $30 a share.
This plunge was despite the fact that the company beat earnings estimates by 31 cents a share, posting per share profits of $6.79 and net revenues of $4.95 billion. Despite the poor reaction to the numbers, things look pretty bright for Google. Their NexusOne phone already makes up 9.3% of the stock according to Trefis and this will likely go higher after the phone hits the market and begins to take market share in the smart phone segment.
Tech ETFs In Focus
Three ETFs have more than 5% of their total assets in Google: iShares S&P North American Technology Fund (IGM), Vanguard Information Technology Fund (VGT), and iShares Dow Jones US Technology Fund (IYW). All three will look to open Friday markedly lower after the disappointing reaction to Google and the Dow’s 214 point drop on Thursday, which erased year to date gains in the market. All three are tech heavy funds and have been rangebound for most of 2010 as markets have stagnated leaving investors to wonder if a double-dip recession is just around the corner.
- iShares S&P North American Technology Fund (IGM): IGM holds companies based in the United States and Canada that focus on computers, semiconductors, and telecommunications. Google makes up 6% of the fund, while IBM and Microsoft (MSFT), both of whom report earnings next week, make up another 15%. Although the fund has more than 200 holdings, it is dominated by big weightings to high-tech behemoths such as Apple (AAPL) and Cisco (CSCO), which round out the top five largest holdings.
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- Vanguard Information Technology Fund (VGT): As with most Vanguard Funds, this Technology ETF does a great job at keeping expenses down; its expense ratio comes in at 0.25%, making it the lowest in the category. The fund also has one of the highest percentage weightings to Google and IBM (a combined 13.2%). This ETF also offers deep exposure to the tech sector, with more than 400 individual holdings. VGT also has one of the higher P/Es at well over 30, compared to the low and mid twenties for the rest of the sector.
- iShares Dow Jones US Technology Fund (IYW): This fund maintains heavy weightings towards technology hardware and software. IYW is also one of the more concentrated funds in the sector with the top five holdings (including Google) comprising nearly 43% of the portfolio. IYW maintains an expense ratio of 0.48%.
Disclosure: No positions at time of writing.