Shares of Google (NasdaqGM: GOOG) raced to a new all-time high during Thursday’s after-hours session after the Internet search giant reported fourth-quarter EPS of $12.01 on revenue of $16.86 billion. Analyst expected a profit of $12.21 a share on revenue of $16.75 billion.
The news sent the stock soaring, positioning it for a run to $1,200 as soon as today. At these levels, some investors have turned to exchange traded funds as a way of participating in some of Google’s upside.
There are some ETFs that are chock full of triple-digit, or in Google’s case quadruple-digit, darlings and the seemingly never-ending run higher in Google’s market value ensures the stock will become increasingly important to the price action of these ETFs going forward. [Triple-Digit Divas Found in These ETFs]
“The momentous rise in market capitalization (calculated of course by stock price multiplied by shares outstanding) over the past quarter in GOOG and it’s rising weighting in several giant market cap based indexes (GOOG now carries a 1.90% weighting in the S&P 500 Index and ranks as the third largest holding behind XOM and AAPL, and it is the second largest weighting in the well-known Nasdaq 100 Index at 7.85%,” said Street One Financial Vice President Paul Weisbruch in an email exchange with ETF Trends.
As of Wednesday, Google was tied with Microsoft (NasdaqGM: MSFT) as the second-largest holding in the PowerShares QQQ (NasdaqGS: QQQ), the Nasdaq 100 tracking ETF. Google accounts for 7.85% of QQQ’s weight, or 370 basis points less than the weight commanded by Apple (NasdaqGM: AAPL), but Google’s impact on ETFs is not confined to QQQ.
As of Wednesday, Google was the second-largest holding in the Technology Select Sector SPDR (NYSEArca: XLK), the second-biggest U.S. sector ETF, at a weight of 9.33%. The iShares U.S. Technology ETF (NYSEArca: IYW) devotes almost 11% to Google while the stock is the largest holding in the First Trust Dow Jones Internet Index Fund (NYSEArca: FDN) at nearly 10% of that ETF’s weight.
“To be concise, we just question whether everyone realizes how quickly GOOG has grown in terms of relative market capitalization, not only in the very short term (i.e. the past quarter), but keeping in mind that the company only debuted publicly less than ten years ago, in August of 2004. Thanks to the rally in the company’s stock price, GOOG has surpassed more established companies in terms of market cap with ease, such as Microsoft, Chevron (NYSE: CVX), Johnson & Johnson (NYSE: JNJ) and Wells Fargo (NYSE: WFC) to name a few,” said Weisbruch.
As has been the case with the meteoric rises in market value of some other technology companies, namely Apple, Google’s ascent has previously prompted speculation about membership in the Dow Jones Industrial Average. Although Google’s complex, long-delayed share split plans are now a go, Weisbruch says investors should not hold out hope Google finds its way into the Dow. [Dow’s Decline Shows Index Flaws]
“If GOOG were to say move 10% post earnings in either direction, we are talking a move greater than $113 per share, and its effects on a price weighted index such as the Dow would have such exaggerated effects on the index to begin with that, to many, the inclusion of the stock would eliminate if not severely limit the reason to index in the first place. So for now, we will be watching Tech specific, and GOOG heavy index ETFs in tandem with GOOG’s stratospheric stock movement, and leaving the Dow out of the discussion…perhaps forever,” added Weisbruch.
Even if Google was split two-for-one at $1,200 and entered the Dow at $600, the stock’s impact on the index and the SPDR Dow Jones Industrial Average ETF (NYSEArca: DIA) would be comical, dangerous or both.
SPDR Dow Jones Industrial Average ETF Top-10 Holdings
Chart Courtesy: State Street Global Advisors
Tom Lydon’s clients own shares of Apple, Google, Microsoft and QQQ.