A Global Approach to Tech ETFs

With the fourth quarter nearly here, perusing technology sector exchange traded funds is a solid plan due to the sectors propensity for outperforming the broader market during the final three months of the year.

However, investors should not limit their search to U.S.-focused. As proven by the iShares Global Tech ETF (NYSEArca: IXN), mixing in some global exposure with marquee U.S. tech companies can produce solid returns. The $753 million IXN is up nearly 12% this year.

Based on S&P Capital IQ’s proprietary Performance Analytics we have an Overweight outlook for IXN generally employing inputs from S&P Capital IQ STARS, Fair Value, and Technical Indicators. We believe Quality Rank, Risk Assessment, and Credit Rating, along with Standard Deviation, are important risk measures, and we view IXN’s Risk Considerations as Marketweight compared to other ETFs in its asset class. Finally, our assessments for cost factors such as expense ratio and Price to NAV lead to a Marketweight ranking,” said S&P Capital IQ of IXN in a recent research note.

IXN has added nearly $30 million in new assets since we last highlighted the fund two months ago, garnering fans because of a hefty 13.9% weight to Apple (NasdaqGS: AAPL). That is one of the largest weights to the iPhone maker among ETFs, particularly those funds that are not entirely devoted to U.S.-based firms. [Global Tech ETF Tempts]

However, IXN is more than just an “Apple ETF.” The average S&P Capital STARS rating for the ETF’s top-10 holdings, which combine for roughly 50% of the fund’s weight, is 3.5 stars. The lowest quality rating applied to any of IXN’s top-10 holdings is B+, according to &P Capital IQ.

The research firm said IXN “stands out favorably to S&P Capital IQ in part for the Fair Value of its holdings and for bullish Technical trends. The ETF offers high exposure to Technology Hardware, Storage & Peripherals, Semiconductors, and System Software stocks. While three-fourths of the assets are in U.S. companies, Japanese, Taiwanese and Korean stocks are also inside.” [Proper Use of Global Sector ETFs]

IXN offers other benefits as well, including deep exposure to companies that are increasingly prioritizing shareholder rewards, including dividends share repurchases.