Even when ignoring that these departures coincide with Apple’s seemingly never-ending rise, they are ill-timed for other reasons. For example, tech is looking more like a value sector, not the over-inflated, richly valued group investors remember from 1999 and 2000.
“Tech seems to have become a new Value sector. Growth has slowed, but long-term growth forecasts still far exceed those for the S&P500 while margins & ROE remain impressively high. Unlike many sectors valuations have not drifted much higher since 2009. As a result, Tech now trades at a P/E discount to the S&P500 whereas historically it has enjoyed a premium. We think Tech appears relatively attractive at these levels,” according to AltaVista.
Based on 2015 estimates, the S&P 500 trades at 16.4 times earnings, but XLK is at 15.8 times this year’s expected earnings. On the basis of price to earnings growth and price to free cash flows, XLK is also slightly less expensive the S&P 500, according to AltaVista data. [Charts Say Tech ETF Rally is Coming]
Technology Select Sector SPDR
Tom Lydon’s clients own shares of Apple.