Best And Worst Q1 2019: Technology ETFs And Mutual Funds

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Includes: ARKK, FDCPX, RSIFX, XLK
by: David Trainer
Summary

The Technology sector ranks fourth in Q1'19.

Based on an aggregation of ratings of 428 stocks in the Technology sector.

XLK is our top-rated Technology sector ETF and FDCPX is our top-rated Technology sector mutual fund.

The Technology sector ranks fourth out of the 11 sectors as detailed in our Q1'19 Sector Ratings for ETFs and Mutual Funds report. Last quarter, the Technology sector ranked second. It gets our Neutral rating, which is based on an aggregation of ratings of the 428 stocks in the Technology sector. See a recap of our Q4'18 Sector Ratings here.

Figures 1 and 2 show the five best and worst rated ETFs and mutual funds in the sector. Not all Technology sector ETFs and mutual funds are created the same. The number of holdings varies widely (from 18 to 341). This variation creates drastically different investment implications and, therefore, ratings.

Investors seeking exposure to the Technology sector should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

Our Robo-Analyst technology[1] empowers our unique ETF and mutual fund rating methodology, which leverages our rigorous analysis of each fund's holdings.[2] We think advisors and investors focused on prudent investment decisions should include analysis of fund holdings in their research process for ETFs and mutual funds.

Figure 1: ETFs with the Best & Worst Ratings - Top 5

Technology ETFs 1Q19 * Best ETFs exclude ETFs with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

KOIN is excluded from Figure 1 because its total net assets (TNA) are below $100 million and do not meet our liquidity minimums.

Figure 2: Mutual Funds with the Best & Worst Ratings

Technology mutual funds 1Q19 * Best mutual funds exclude funds with TNAs less than $100 million for inadequate liquidity.

Sources: New Constructs, LLC and company filings

Two mutual funds (ICTEX, STPIX) are excluded from Figure 2 because their total net assets are below $100 million and do not meet our liquidity minimums.

XLK is the top-rated Technology ETF and FDCPX is the top-rated Technology mutual fund. Both earn a Very Attractive rating.

ARKK is the worst rated Technology ETF and RSIFX is the worst Technology mutual fund. They both earn a Very Unattractive rating.

428 stocks of the 2750+ we cover are classified as Technology stocks.

The Danger Within

Buying a fund without analyzing its holdings is like buying a stock without analyzing its business and finances. Put another way, research on fund holdings is necessary due diligence because a fund's performance is only as good as its holdings' performance. Don't just take our word for it, see what Barron's says on this matter.

PERFORMANCE OF HOLDINGs = PERFORMANCE OF FUND

Analyzing each holding within funds is no small task. Our Robo-Analyst technology enables us to perform this diligence with scale and provide the research needed to fulfill the fiduciary duty of care. More of the biggest names in the financial industry (see At BlackRock, Machines Are Rising Over Managers to Pick Stocks) are now embracing technology to leverage machines in the investment research process. Technology may be the only solution to the dual mandate for research: cut costs and fulfill the fiduciary duty of care. Investors, clients, advisors and analysts deserve the latest in technology to get the diligence required to make prudent investment decisions.

Figures 3 and 4 show the rating landscape of all Technology ETFs and mutual funds.

Figure 3: Separating the Best ETFs From the Worst ETFs

Sources: New Constructs, LLC and company filings

Figure 4: Separating the Best Mutual Funds from the Worst Mutual Funds

Sources: New Constructs, LLC and company filings

This article originally published on January 15, 2019.

Disclosure: David Trainer and Kyle Guske receive no compensation to write about any specific stock, sector or theme.

[1]Harvard Business School features the powerful impact of our research automation technology in the case New Constructs: Disrupting Fundamental Analysis with Robo-Analysts.

[2]Ernst & Young's recent white paper "Getting ROIC Right" proves the superiority of our holdings research and analytics.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.