The sluggish start to 2022 by technology stocks could eventually give way to opportunity. Some market observers argue that it’s already happening, as some high-quality tech stocks are now attractively valued.

The slow start is also a reminder that diversification, even at the sector level, is important. Among exchange traded funds, the Invesco S&P 500 Equal Weight Tech ETF (RYT) addresses the scenarios mentioned here. RYT presents investors with an avenue by which to position for a tech sector rebound while mitigating single stock risk.

Consider the following. The cap-weighted version of the S&P 500 Technology Index allocates nearly 46% of its combined weight to just two stocks, Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT). Conversely, RYT’s largest component, Citrix Systems Inc. (NASDAQ:CTXS), accounts for just 1.77% of that ETF’s roster.

RYT is also relevant in the current environment because following recent weakness, some tech and growth stocks are offering value.

“We continue to find the value category attractively priced. However, carnage across growth stocks pushed them down well into undervalued territory,” writes Morningstar analyst Dave Sekera. “Even the technology sector, which had been one of the most overvalued at the beginning of the year, is now littered with undervalued opportunities.”

As a dedicated technology ETF, it’s not surprising that RYT leans toward growth stocks with such names representing nearly 36% of the fund’s weight. However, RYT isn’t bereft of value fare, either, as more than 17% of its 78 holdings are considered value stocks.

In other words, RYT isn’t just diverse at the holdings level. It’s somewhat diverse in terms of factor exposure, too. Moreover, its credibility as an avenue to the value currently being offered in the tech sector is a noteworthy trait today.

“According to our calculations, technology was one of the most overvalued sectors coming into the year. In January, the sector plunged 11.84%. Following this decline, we now calculate that the price to fair value of the technology sector is fairly valued at 0.99. With the sharp drop in prices we are seeing more and more undervalued opportunities for investors, as many high-quality tech stocks were pushed down with the broader sector,” concludes Sekera.

Information technology services providers and semiconductor makers combine for about 51.5% of RYT’s roster. The average market value of its components is $157.2 billion, compared to a weighted average market value of $1.3 trillion in the S&P 500 Technology Index.

For more news, information, and strategy, visit the Portfolio Strategies Channel.

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.