The technology sector has had its share of star performances this year. Shares of Dow component Microsoft (NasdaqGM: MSFT) are up 35.3% while Internet search giant Google (NasdaqGM : GOOG) has surged 54%.
Still, the Technology Select Sector SPDR (NYSEArca: XLK) and comparable ETFs, for much of this year, have traded at valuations that would indicate tech is neither expensive nor on the cusp of another bubble. In fact, while XLK is approaching a 26% gain for 2013, that performance is middling relative to the nine sector SPDR ETFs. XLK ranks fifth for 2013 returns behind its discretionary, health care, industrial and financial services counterparts. [Embrace Cyclical ETFs in December]
However, technology shares look to be finishing the year on a strong note, and that has forced the trailing 12-month P/E ratio on XLK to its highest levels of the year, as Bespoke Investment Group points out.
Near 18.2, XLK’s trailing 12-month P/E resides at its loftiest levels of 2013. Earlier this month, S&P 500 technology sector had a forward 12-month P/E of 14.7, above its five-year average of 13.6, but below the 10-year average of 16.8. That made the sector less expensive than the S&P 500 along with the utilities, health care and consumer staples sectors, just to name a few. [Financial Services ETFs Get no Respect]