While Nasdaq tech companies have been powering ahead, exchange traded funds that target internet stocks have been among the best performers this year.
Year-to-date, the First Trust Dow Jones Internet Index Fund (NYSEArca: FDN) rose 22.4% and PowerShares NASDAQ Internet Portfolio (NasdaqGS: PNQI) gained 20.5%. In contrast, the Nasdaq Composite was up 7.8% and the S&P 500 Index was 2.2% higher so far this year.
ETF investors were also quick to jump on the internet stock bandwagon. For instance, FDN attracted net inflows of $2.6 billion year-to-date, according to ETF.com.
FDN tries to reflect the performance of the Dow Jones Internet Composite, which includes a number of online search engines, social networking, e-commerce, internet infrastructure and telecom services companies.
PNQI follows the NASDAQ Internet Index, which like the name implies includes a number internet-related businesses as well.
Among the top movers and shakers within the sector, Amazon (NasdaqGS: AMZN) surged 113.6% and Netflix (NasdaqGS: NFLX) jumped 140.4% year-to-date as these tech companies expanded their online presence and generated strong earnings growth. AMZN makes up 9.9% of FDN and 8.1% of PNQI. NFLX is 4.8% of FDN and 3.9% of PNQI.
Investors may also be acquainted with many other major holdings in the two internet ETFs. For instance, FDN includes Facebook (NasdaqGS: FB) 10.0%, Alphabet Class A (NasdaqGS: GOOG) 5.0%, Alphabet Class C (NasdaqGS: GOOGL) 5.0%, Salesforce.com (NasdaqGS: CRM) 4.8%, PayPal (NasdaqGS: PYPL) 4.7%, eBay (NasdaqGS: EBAY) 3.9% and Yahoo (NasdaqGS: YHOO) 3.9%.
PNQI’s portfolio also tracks a similar group of U.S. internet companies, including 8.3% PCLN, 8.2% GOOG, 8.2% FB, 4.1% YHOO and 3.8% EBAY. Additionally, the PowerShares ETF holds a number of Chinese internet names, such as Baidu (NasdaqGS: BIDU) 7.2% and JD.com (NasdaqGS: JD) 4.3%.
While these internet ETFs may be seen as a type of tech sector play, the two funds also include consumer discretionary exposure. Specifically, the internet ETFs include some e-commerce or online retail presence, so the funds may be susceptible to shifts in consumer spending and sentiment.
FDN includes a 70.0% tilt toward information tech names and a 22.1% position in consumer discretionary. Meanwhile, PNQI holds 57.8% in technology and 31.2% in consumer cyclical. [Which ETFs Will Best Capture 2015’s Holiday Shopping Trends?]
For more information on the tech sector, visit our technology category.
Max Chen contributed to this article.