Prior to the election, the tech sector framed itself as a crucial safe haven. The ALPS Disruptive Technologies ETF (CBOE: DTEC) is continuing that conversation.
DTEC tracks the Indxx Disruptive Technologies Index, which identifies companies using disruptive technologies across ten thematic areas, including Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics, and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments.
Last week, U.S. equities surged, but DTEC stood, soaring 9.5%, trouncing the S&P 500 and traditional technology exchange traded funds in the process. The fund also topped the NYSE FANG Index, which is home to tech juggernauts such as Facebook, Apple, Amazon, Netflix, Google, Microsoft, etc.
DTEC Right for the Times
Some other DTEC highlights include industry level diversity, which many traditional rivals lack, and strong exposure to high-growth themes, including cloud computing and cybersecurity.
Making DTEC’s recent out-performance all the more striking is its overlap with the S&P 500 is a mere 9% and just one of its holdings is found in the aforementioned NYSE FANG Index. DTEC has other, longer-ranging tailwinds.
Declining costs in cloud adoption and increasing ease of use are among the factors driving the cloud computing boom. Infrastructure-as-a-Service companies provide the computing infrastructure, delivered over the internet, that enables other firms to build services more efficiently. It helps scale computing demand and avoid the high expenses and complexity of buying and managing infrastructure.
Data confirm DTEC’s healthcare innovation exposure is compelling, too. Healthcare spending made up 18% of U.S. GDP, and it is rising. Looking ahead, by 2020, it is projected that global healthcare spending could shoot up to $8.7 trillion as the industry faces increased challenges from an aging population, rising costs, shortage of skilled workers, dealing with legacy IT, invasive procedures, and medical errors.
Year-to-date, DTEC’s underlying index is beating the Morningstar Exponential Tech Index by more than 600 basis points.
Other technology funds to consider include the Technology Select Sector SPDR ETF (NYSEArca: XLK) and the Fidelity MSCI Information Technology Index ETF (FTEC).
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.