Current valuations on some of XLK’s largest holdings, which are also among the largest holdings in the PowerShares QQQ (NasdaqGM: QQQ), the Nasdaq 100 tracking ETF, are far from the frothy levels seen at the height of the tech bubble in 2000. In 2000, the average P/E ratio for Microsoft, Cisco (NasdaqGS: CSCO) and Intel (NasdaqGS: INTC), the XLK holdings that were Nasdaq 100 members then and now, was nearly 76. Today, the combined P/E ratio for those stocks is just 43. Microsoft, Cisco and Intel combine for nearly 15% of XLK’s weight.
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 and QQQ.