Targeting Tech Stocks Below The Magnificent Seven<\/b><\/p>\n
Although the rise of the largest technology stocks known as \u201cThe Magnificent Seven\u201d has not yet reached return levels experienced midway through 2023, they are off to another relatively strong start as a group.\u00a0 One stock that has stood out in particular is Nvidia (Ticker: NVDA) which has risen so high, more than 82%, that it now has the highest market capitalization in the US.\u00a0 Many strategists have been in the media this week suggesting that the market is too dependent on <\/span>NVDA<\/b>, expressing fears that the perceived tech bubble could soon burst if tech leadership did not broaden.\u00a0 <\/span>NVDA <\/b>has gone through the roof because its hardware is essential for further development to most of the established leaders in the Artificial Intelligence race.\u00a0 Its recent 10-for-1 split underscores the company\u2019s meteoric rise.\u00a0 However, as impressive as the rise of NVDA has been, opportunities in the tech sector clearly stretch below this one stock and its peers in the \u201cMagnificent Seven.\u201d<\/span><\/p>\n ________________________________________________________________________________<\/span><\/p>\n Existing subscribers alert:<\/b> ValuEngine is preparing to launch a completely redesigned website in the coming weeks.\u00a0 Alerts and more information will be sent a few days prior to the launch.<\/span><\/p>\n ________________________________________________________________________________<\/span><\/p>\n With an eye towards potential broadening of the tech sector opportunity set, this blog focuses on a few selected Technology ETFs. Three of these target a broad segment of stocks, of which most are not in the <\/span>QQQ<\/b>, followed by a quick look at a few technology stocks most highly rated by ValuEngine.\u00a0\u00a0<\/span><\/p>\n FXL – <\/b>This\u00a0ETF, sponsored by First Trust<\/span>,<\/span>\u00a0offers exposure to the U.S. tech sector which makes it one of many options available to investors seeking to access an industry that is capable of remarkable rallies and steep declines over short periods of time. Given the sector-specific focus,\u00a0<\/span>FXL<\/b> may be too granular for those building a long-term, buy-and-hold portfolio, but can be useful for investors putting on a tactical tilt or looking to beef up tech sector exposure. <\/span>FXL<\/b>\u2019s primary appeal is the use of the \u2018AlphaDex\u2019 methodology which seeks to select the best tech companies from the Russell 1000 Index universe. This is done by ranking the firms on a variety of growth and value factors including momentum,\u00a0<\/span>ROE<\/span>, and CF\/P, just to name a few. Thanks to this method, the fund casts a much smaller net than others in the sector, holding just 85 securities.<\/span><\/p>\n PSCT \u2013 <\/b>This ETF, sponsored by Invesco, tracks a broad index of small companies in the information technology sector which the issuer considers to be the following areas; software, internet, electronics, semiconductors, communication and hardware. As a result, this fund tracks some of the quickest growing and most volatile companies in the technology sector. The fund focuses entirely on U.S. stocks and is relatively well spread out; it holds 130 securities in total and puts just 19.5% in its top ten holdings. Investors should also note that while this is a small cap fund it also offers exposure to other asset class sizes as well; mid-caps make up almost 2.1% while micro caps make up nearly 30% as well. As a result, this fund will be more of a growth play than one that presents strong value opportunities for investors. This fund could make an interesting potential complement for investors who are bullish on tech but already have significant exposure to large caps. This fund could also provide a different mix of companies and add to overall diversification within the sector.<\/span><\/p>\n QQQJ<\/b> – The Invesco\u00a0<\/span>NASDAQ<\/span>\u00a0Next Gen 100\u00a0<\/span>ETF<\/span>\u00a0(<\/span>QQQJ<\/span>) tracks an index of the largest non-financial stocks listed on Nasdaq that aren\u2019t included in the Nasdaq-100 index.\u00a0 Many Nasdaq specialists refer to this ETF as Q Junior.\u00a0 <\/span>QQQJ<\/b> gives investors easy exposure to Nasdaq stocks positioned for potential growth. For investors concerned about a size bias in their tech holdings, Q Junior can also help offset the large-cap tilt of\u00a0<\/span>QQQ<\/b>\u00a0and <\/span>QQQM<\/b>.<\/span><\/p>\n These three ETFs are compared down below to two much larger ETFs that are dominated by stocks included in \u201cThe Magnificent Seven.\u201d\u00a0 These two larger ETFs are:<\/span><\/p>\n XLK – <\/b>State Street\u2019s XLK is known as the Technology Select Sector SPDR Fund. To be included in this ETF, an S&P 500 Constituent must be one of numerous sectors under the technology umbrella. This includes market segments like IT services, wireless telecommunication services, and semiconductors to name just a few. The fund invests in the who\u2019s-who of the U.S. tech sector, with major holdings in companies like Apple and IBM. With just 66 stocks, it is the narrowest of the ETFs featured in this analysis.<\/span><\/p>\n QQQ \u2013 <\/b>The Invesco QQQ Trust Series I offers exposure to what has become one of the world\u2019s most widely-followed equity benchmarks, the Nasdaq-100.\u00a0 It is popularly considered the standard-bearer for the US tech sector.\u00a0 This is true even though it includes stocks that aren\u2019t in the tech industry and omits tech stocks not listed on the Nasdaq.\u00a0 The liquidity of this ETF as a trading vehicle is unmatched. That said, investors buying new shares for a long-term investment in US technology stocks may wish to use <\/span>QQQM<\/b> instead of <\/span>QQQ. <\/b>The Invesco NASDAQ 100 ETF (note the original was designed as a Unit Investment Trust), <\/span>QQQM <\/b>is often referred to as the Q Mini.\u00a0 This sounds a lot like the Q Junior but do not be confused. <\/span>QQQM <\/b>holds precisely the same portfolio as <\/span>QQQ. <\/b>The \u201cmini\u201d aspect is that it has a lower expense ratio, 0.15% as compared with 0.20% for <\/span>QQQ.\u00a0 <\/b>Of course <\/span>XLK, <\/b>discussed in the above paragraph, gives investors pure tech exposure, including companies listed on the NYSE and the Cboe, and does so for an even lower expense ratio, 0.09%.\u00a0\u00a0<\/span><\/p>\n Here is the data table comparing the 5 ETFs.<\/span><\/p>\nAll 5,000 stocks, 16 sector groups, 140 industries, and 500 ETFs have been updated:<\/b><\/h5>\n
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All 5,000 stocks, 16 sector groups, 140 industries, and 500 ETFs have been updated:<\/b><\/h5>\n
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