Apple stock and other big-cap techs such as Microsoft and Nvidia are in buy range or close to new buy points ahead of earnings.
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But buying individual stocks ahead of earnings can be risky. Tech ETFs, however, helps reduce risk by owning a basket of stocks. One such ETF is iShares U.S. Technology (IYW). The $9 billion fund, which marked its 21st anniversary in May, provides access to U.S. electronics, computer software and hardware, and informational technology companies.
IYW began tracking the Russell 1000 Technology RIC 22.5/45 Capped Index last month. It used to track the Dow Jones U.S. Technology Capped Index. The top holdings in the new index overlapped with the old one but with different weightings, according to Financial Times.
Going into Friday, the ETF was up nearly 28% this year, beating the S&P 500’s 21% year-to-date gain. It’s also outperformed over the longer haul, with average annual returns of 34.9%, 30.6% and 22.2% over the past three, five and 10 years. The market, as tracked by SPDR S&P 500 ETF Trust (SPY), has returned 19.9%, 18.3% and 16.3% over the same time frames.
Software and services accounted for the ETF’s biggest sector weight as of Wednesday, at nearly 43% of assets. About 20% was in semiconductors and semiconductor equipment, 19% in tech hardware and equipment, and 17% in media and entertainment. Capital goods, retailing, and commercial and professional services made up the rest.
Apple Stock Leads Top Holdings
Top 10 holdings include Apple (AAPL), Microsoft (MSFT), Alphabet Class A (GOOGL) and C shares (GOOG), Facebook (FB), Nvidia (NVDA) and Intel (INTC). Apple and Microsoft are by far the biggest two, at more than 16% each. Together, the top 10 make up about 61% of the 151-stock portfolio.
Apple stock, up 13% this year, is shaping the right side of a cup base with a 157.36 buy point. The iPhone maker scores a strong 96 Earnings Per Share Rating. But its Relative Strength Rating is a lukewarm 65, which puts it in the top 35% of all stocks. Apple announces fiscal Q4 results after the closing bell on Thursday.
Microsoft stock, up nearly 40% year to date, climbed past a 305.94 buy point of an eight-week flat base on Oct. 18. It remains in buy range up to 321.24. Its relative strength line, which compares a stock’s performance to the S&P 500, has hit new highs. Microsoft, an IBD Leaderboard and IBD Long-Term Leaders stock, reports Tuesday after the close.
Other Leaderboard stocks in IYW’s top 10 are Alphabet, Nvidia and Adobe (ADBE).
Nvidia is approaching a 230.53 buy point of a new shallow base after running up more than 70% this year. With a highest possible 99 Composite Rating, the graphics chip designer leads the 29-stock fabless semiconductor group. Nvidia reports next month.
Intel Beats Q3 Forecasts
Late Thursday, Intel reported Q3 results. The chip giant earned an adjusted $1.71 a share on sales of $19.19 billion in the September quarter. Analysts expected $1.11 a share on sales of $18.24 billion, according to FactSet. Intel stock is building the bottom of a long consolidation with a 68.59 buy point. At Thursday’s close, it was about 18% below the entry.
IYW is close to a 109.25 buy point of a 13-week-old flat base, according to MarketSmith chart analysis. It’s about 1% away from the entry. Shares rose 14% after a breakout from a prior cup base to the start of the current pattern. The ETF charges a 0.41% expense ratio.
Follow Nancy Gondo on Twitter at @IBD_NGondo
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