Technology Sector ETFs
By Arthur B. Hill - Tue 15-Jan-08 9:46 AM EST
Not all Technology Sector ETFs are created equal. The composition and weighting of the components will influence the performance. It is important to know the components to pick the right ETF for the current market environment. Look for market capitalization weighted ETF when large-caps are outperforming and equal weighted ETFs when small-caps are outperforming. Here at ETFInvestmentOutlook.com, we follow four Technology sector ETFs.
- Technology SPDR (XLK)
- Technology PowerShares Dynamic (PTF)
- Technology iShares Goldman Sachs (IGM)
- Technology iShares Dow Jones (IYW)
There are two main differences in these ETFs. First, AT&T (9.7%) and Verizon (4.9%) feature prominently in the Technology SPDR (XLK). These are telecom companies that do not feature in the Technology PowerShares (PTF). Second, the weightings in the Technology PowerShares (PTF) are more evenly dispersed than those in the Technology SPDR (XLK). The top ten holdings in XLK account for over 60% of the ETF. The top holding in PTF is only 3%, which makes it a more diverse ETF that is more geared towards small and mid-cap stocks. XLK is geared toward large-cap stocks.
With small-caps leading the market lower the last six months, it is little surprise that the Technology PowerShares (PTF) is weaker than the Technology SPDR (XLK). PFT peaked in July and formed a lower high in October. The ETF then went on to break the March and August lows. This shows relative weakness. In contrast, the Technology SPDR (XLK) moved above its July high in October and forged a higher high. XLK has yet to break its August low and is holding up better than PTF.
--------------------------------------------------------
--------------------------------------------------------
