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Wednesday February 01, 2012
S&P's trio of info tech ETFS
by Dylan Cathers, S&P Capital IQ Equity Analyst, S&P The Outlook Information technology is one of four sectors that S&P Capital IQ’s Sector Strategy Group currently recommends investors overweight in their portfolios. For investors with a favorable outlook for the technology industry, S&P Capital IQ equity analysts favor several large-cap technology stocks including IBM (IBM), Oracle (ORCL), Microsoft (MSFT), and Apple (AAPL), which all earn our highest 5-star buy rating. Large capitalization stocks such as these tend to be widely held in ETFs. Those looking for exposure to the sector have several ETFS with an overweight recommendation to choose from. To narrow the list, we concentrated on ETFs with overweight scores for both performance analytics and cost factors, and those that have track records longer than three years. Not surprisingly, the top ETF in our screen, both in terms of annualized three-year return and market cap, is PowerShares QQQ Trust (QQQ). The QQQ tracks the price and yield of the NASDAQ-100 Index. On average, our analysts have a neutral view of the stocks in the ETF’s portfolio as measured by S&P STARS, but the fund receives a favorable score based on our proprietary S&P Fair Value metric. QQQ’s risk considerations scores are generally positive, as are its cost factors. Another strong performing technology ETF is the Vanguard Information Technology Index Fund (VGT). Its objective is to track the MSCI US Investable Market Information 25/50 Index. All three of our performance analytics measurements are positive, including S&P STARS, S&P Fair Value, and S&P Technical. VGT’s risk considerations scores are generally positive, as are its cost factors. Technology Select Sector SPDR Fund (XLK) is the final IT sector ETF that met our criteria. XLK’s objective is to match the performance of the Technology Select Sector Index, which tracks a variety of IT industries, including computers & periph- erals, software, and IT services. Like VGT, XLK’s performance analytics scores are all positive. Its risk considerations and cost factors score are generally favorable as well. Learn more about this financial newsletter at S&P The Outlook. 
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