In what has been a good year for the technology sector and the corresponding ETFs, Internet stocks and ETFs are contributing to some of that upside.
For example, the First Trust Dow Jones Internet Index Fund (NYSEArca: FDN) is higher by nearly 9% year-to-date.
With the holiday shopping season here, FDN could have some tailwinds as U.S. consumers increasingly turn to the convenience of online shopping over traditional brick and mortar retailers.
Online retail outlets or the e-commerce business seems to be flourishing. Amazon (NasdaqGS: AMZN) revealed strong quarterly growth in both earnings and revenues. Online bazaar eBay (NasdaqGS: EBAY) impressed investors after management raised guidance and reported revenue beats. Chinese e-commerce behemoth Alibaba Group Holding Ltd. (NYSE: BABA) showed second quarter earnings beat estimates with revenue above the consensus.
SEE MORE: Internet ETFs to Capitalize Off Growth in E-Commerce
Observers have pointed to blow-out events like Amazon’s Prime Day sale on July 12 as large selling points to attract greater consumer interest, supporting the notion that consumers have shifted their spending habits. Wal-Mart has also noticed this ongoing shift and is acquiring e-commerce retailer Jet.com to bolster its online presence.
Amazon and eBay combine for nearly 14% of FDN’s lineup. The $3.59 billion ETF tracks the Dow Jones Internet Composite Index. FDN follows companies that generate most of its revenue from internet businesses and includes some market cap and liquidity requirements for inclusion.
Recent declines in some of FDN’s marquee holdings could signal opportunity for astute investors to get involved with the ETF before it soars again.
“In most cases, the top 10 holdings are all 7-8% or more off of recent highs. I still like Google and Facebook as long term holdings despite the fact that the challenges of the online ad revenue model may be catching up to them. Netflix’s future depends on how well it can continue growing overseas. I like Salesforce (NYSE:CRM) now that its flirtation with Twitter (NYSE:TWTR) is (hopefully) behind it,” according to a Seeking Alpha analysis of FDN.
SEE MORE: Technology ETFs Are Making a Strong Comeback
FDN’s primary rival is the PowerShares NASDAQ Internet Portfolio (NasdaqGS: PNQI). PNQI tracks the largest and most liquid U.S.-listed companies engaged in internet-related businesses and employs a modified market cap-weighted indexing methodology based on the market cap ranking of the underling idnex securities.
First Trust Dow Jones Internet Index Fund (NYSEArca: FDN)
