VGT Vanguard Information Technology ETF

The technology sector had a decent enough 2012, posting solid gains over the time frame. However, this year, the sector has faced some choppy seas leading to underperformance.

In fact, some are starting to think that the tech sector may have lost its way. So much so that investors shifted their focus from technology to other, better performing sectors (Three Great Tech ETFs That Avoid Apple).

However, much of this pressure is due to a few key companies experiencing uncertain trading. In particular, technology giant Apple (AAPL) has been hampering tech returns thanks to its terrible run over the past few months.

Shares of AAPL have been in quite the slump since September, the last time the firm touched the $700/share mark. Now, the company is below $400/share, marking a dramatic decrease for the once-unbeatable technology company.

Attention now turns to the company’s earnings report and its prospects for the future. Many are wondering if the company can soothe investor fears and return to prominence at some point later this year (3 Sector ETFs Surviving This Slump).

Apple Result in Focus

Since the last earnings announcement in January, Apple has been stealing the headlines because of a series of bad performances. Investors remained apprehensive about slowing growth, falling gross margins, future product releases, and a lack of any clear plan that returns additional cash to shareholders.

After reporting a series of disappointing results, Apple recently reported its earnings for the March quarter which was in line with expectations. The management appeared to be quite confident as the company announced various measures to unlock shareholder value.

Some of the key stats for the latest earnings release include:

Earnings: $10.09/share actual vs. $10.00/share expected

Revenue: $43.60 billion actual vs. $42.33 billion expected

Also, Apple raised its limit for share buy back from $10 billion to $60 billion and increased its dividend 15% to $3.05/shares. Shares had been climbing in regular trading prior to the earnings announcement, though they are sluggish in the trading session immediately following the release (3 Apple Proof ETFs).

ETF Angle

In this uncertain scenario, it is important to remember which ETFs have a big exposure to the tech giant. Thus, we have highlighted three popular tech ETFs below that are heavily invested in this technology company and look to be big movers depending on how AAPL does in the near term:

PowerShares QQQ (QQQ)

QQQ is an ETF which is highly dependent on Apple for its performance. The fund has 11.55% exposure in Apple.

The ETF appears to have a rich asset base of $31.7 billion and is a popular ETF among investors. QQQ trades at volume levels of more than 53 million shares a day (Three ETFs with the Most Apple Exposure).

The ETF is highly concentrated on its top ten holdings, taking up about 49.68% of the assets, suggesting that the return of the fund is much more dependent on these companies.

QQQ also pays a good 1.25% in annual dividends. The fund has greater focus on large caps (26%) and a small part of it is allocated towards mid caps securities.

Within the sector, Information Technology occupies the top position in the basket with 59.59% share, while consumer discretionary and health care make up the rest of the top three. The product holds 100 securities in the basket, and it is a low cost choice, charging a fee of 20 bps a year.

Technology Select Sector SPDR Fund (XLK)

XLK has been designed to provide exposure to the large cap segment of the technology sector. In this fund, Apple plays an influential role to the extent that it takes up 12.81%.

The fund manages an asset base of $9.2 billion and trades at volume levels of more than 12 million shares a day. The fund has a dividend yield of 1.81% and charges investors an annual fee of 18 basis points (Is the Tech ETF Signaling Trouble Ahead?).

The fund appears to be concentrated in the top ten holdings with 62% of the asset base invested in the top ten choices. After Apple, the next two positions are occupied by Microsoft and Google.

Vanguard Information Technology ETF (VGT)

The fund manages a $2.7 billion asset base and provides exposure to a large basket of 416 technology stocks. Although VGT seeks to provide exposure to the entire technology sector — software, hardware and Internet-- the fund appears to be tilted towards large caps. Small allocations have also been made to mid caps and small caps (Mid Cap ETF Investing 101).

Despite a broad exposure to technology stocks, VGT appears to be concentrated in its individual holdings as the top 10 make up 60% of the total asset allocated. This suggests that company specific risk is pretty high in the fund, and that the top ten stocks dominate the returns.

The highest fund allocation goes to Apple with 20.5% of its assets invested in the company, which implies that the performance of the fund is somewhat dependent on that company’s performance. This is followed by International Business Machines Corp. and Microsoft with asset investments of 7.5% and 7.4%, respectively. This tech ETF charges an expense ratio of 14 basis points on an annual basis.

iShares U.S. Tech ETF (IYW)

The fund was launched in May 2000 and since then has managed to build assets under management of $1.8 billion.

The product holds a total of 136 securities in which three tech giants, Apple, Microsoft and International Business Corp, hold the top three positions. The top three companies get a total allocation of 34.6% but the fund does not appear to invest more than 8.94% in any single stock of any other tech firm. On its own, Apple gets a share of 15% in the fund.

The fund appears to be concentrated in the top 10 holdings with more than 66.75% of the asset base invested in these securities. IYW charges an expense ratio of 47 basis points from the investor.

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SPDR-TECH SELS (XLK): ETF Research Reports
 
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