6 ETFs to Watch as Momentum Factor Favors Apple, Netflix

Just like gamblers following the smart money, when factor investors want to know where the money is flowing and going, they look to momentum. It can be a key indicator of which exchange-traded funds (ETFs) can get a boost from increased activity—right now, Apple and Netflix are in the spotlight.

“Momentum crowd money flows are extremely positive in Apple’s shares,” wrote MarketWatch analyst Nigan Arora. “This is a big turn. Momentum crowd money flows have not been consistently extremely positive in Apple for a long time. (The momentum crowd consists of individual investors chasing growth stocks.)”

ETFs with Apple allocations:

  1. Technology Select Sector SPDR ETF (NYSEArca: XLK): tries to reflect the performance of the Technology Select Sector Index, which is comprised of technology and telecom sector of the S&P 500. The ETF includes companies from technology hardware, storage, and peripherals; software; diversified telecommunication services; communications equipment; semiconductors and semiconductor equipment; internet software and services; IT services; electronic equipment, instruments and components; and wireless telecommunication services.
  2. Fidelity MSCI Information Technology Index ETF (FTEC): tries to reflect the performance of the Nasdaq-100 Technology Sector Index, which consists of companies in the Nasdaq-100 Index classified as technology according to the Industry Classification Benchmark. QTEC currently holds 34 components and more-or-less equally weights its holdings.
  3. iShares U.S. Technology ETF (NYSEArca: IYW): reflects the performance of the Dow Jones U.S. Information Technology Index, which includes all tech sector picks in the Dow Jones U.S. Index. Due to the Dow Jones’ classification of information tech names, healthcare technology stocks may be included while payment technology stocks are excluded.

“Of special interest is Netflix,” Arora said. “The momentum crowd was buying Netflix near its highs. When Netflix initially fell, that crowd kept on buying it, perhaps on hopes of a rebound. Such hopes were justified to some extent because in the past Netflix had typically rebounded. When Netflix kept falling and a rebound did not occur, the momentum crowd started selling Netflix near its low. Now the momentum crowd is again buying Netflix.”

ETFs with Netflix allocations:

  1. Invesco NASDAQ Internet ETF (NASDAQ: PNQI): seeks to track the investment results (before fees and expenses) of the NASDAQ Internet IndexSM. The underlying index is designed to track the performance of the largest and most liquid U.S.-listed companies engaged in Internet-related businesses that are listed on one of the three major U.S. stock exchanges.
  2. First Trust Dow Jones Internet Index (NYSEArca: FDN): seeks investment results that correspond generally to the price and yield of an equity index called the Dow Jones Internet Composite Index (SM) (the “index”). The index is designed to measure the performance of the largest and most actively traded securities issued by U.S. companies in the Internet industry. The index is a composite of its two sub-indices, the Dow Jones Internet Commerce Index and the Dow Jones Internet Services Index.
  3. AdvisorShares New Tech and Media ETF (NYSEArca: FNG): an actively managed ETF that seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets in securities of technology and media companies. It will invest primarily in U.S. exchange-listed equity securities, including common and preferred stock and ADRs, of technology and technology-related companies, including innovative and fast-growing technologies. The fund will concentrate its investments in the software and services industry within the information technology sector.

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