Technology exchange traded funds (ETFs) are in positive territory year-to-date, but there may be an opportunity lurking. Some of them are still off their 2007 highs by double digits.
Lee Ainslie of Maverick Capital Management sees tech stocks as cheap. Ainslie believes that a pool of value tech stocks will provide free-cash-flow yields in the double-digit percentages for this year and next, according to Money News.
Therein lies the case for tech: Ainslie points out that tech stocks are very cheap at a 20-year low. Additionally, with a heavily depreciating dollar, U.S. tech exporters are also doing much better in overseas markets. [Telecom and Tech ETFs Work As a Team.]
However, tech companies are not spending enough on capital expenditures and the fundamentals haven’t been doing much to boost the appeal of tech companies, Ainslie adds. [Semiconductor ETFs Hit the Refresh Button.]
On top of that, information technology companies are dishing out more total dividend payouts for the first time in the third quarter than financial companies, catering to yield-starved investors, report Alexis Leonids and Margaret Collins for The Daily Crux. IT stocks made up 9.2% of around $210 billion in dividends paid out, compared to the 8.9% for financial stocks. Dividends have been taxed at a federal rate of 15%, but it may shoot up to ordinary income tax of 39.6% if Congress does not extend Bush-era taxes.
Intel (Nasdaq: INTC) reported better-than-expected third quarter earnings of 52 cents per share, with revenues totaling $11.1 billion, or better than the expected $10.99 billion, writes Matt Phillips for The Wall Street Journal. Intel also projects a better-than-predicted fourth-quarter revenue guidance of $11.4 billion.
For more information on the technology sector, visit our technology category. A full list of all tech ETFs and their relationship to the 200-day moving average can be found in the ETF Analyzer – including these:
- Technology Select Sector SPDR (NYSEArca: XLK): 17.6% below October 2007 high; 7.3% above 200-day moving average
- iShares Dow Jones U.S. Technology (NYSEArca: IYW): 11.9% below October 2007 high; 7.3% above 200-day moving average
- PowerShares QQQ Trust (NASDAQ: QQQQ): 8.9% below October 2007 high; 9.7% above 200-day moving average
Max Chen contributed to this article.
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.