Two ETFs to Play the Networking Renaissance | ETF Trends

The technology sector is white hot these days. If you’re not buying it, just look at the Nasdaq, which has been leaving the other indexes swimming in its wake. Networking exchange traded funds (ETFs) are outperforming nearly every other segment.

Networking shares are enjoying a rally on the back of the technology sector, which has rallied beautifully since the painful recession began to ease up. Don Dion for The Street reports that while the returns of networking stocks are impressive so far in 2010, it remains to be seen whether they can continue. [Why Tech ETFs May Keep Leading in 2010.]

A few fundamentals are in place to justify the run-up, including the Internet’s increasing role in commerce, leisure and entertainment, as well as the overall global market recovery. [Tech ETFs: A Way to Avoid the Guesswork.]

For more stories about technology, visit our technology category.

Here is a break down of the two best performing funds:

  • PowerShares Dynamic Networking (NYSEArca: PXQ): PXQ is the smaller and less traded of the two, with volume low enough to be considered mildly illiquid. Short- and long-term outperformance is touted. PXQ tracks the Dynamic Networking Intellidex Index, a passive index that uses screening criteria based on growth, valuation, timeliness and risk to determine which stocks to hold. PXQ is up 12.8% year-to-date.

  • iShares S&P North American Tech-Multimedia Network (NYSEArca: IGN): IGN uses a modified market cap index that caps a stock at 8.5% of the index. While the underlying index is more stable, the fund’s definition of networking is much broader than PXQ’s. IGN is up 5.7% year-to-date.

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.