Tech stocks are surging this year, but the bullishness is not confined to U.S. technology equities and exchange traded funds. International technology stocks are getting on the fun, too. Just look at the SPDR S&P International Technology Sector ETF (NYSEArca: IPK).
IPK was one of a small number of ETFs to hit record highs last Friday and is now up nearly 27% year-to-date. That is well ahead of the Nasdaq-100 and rival US-focused technology ETFs. Remember that IPK is doing that without help from the likes of Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN) and other big name, US-based technology and Internet stocks.
IPK tracks the S&P Developed Ex-U.S. BMI Information Technology Sector Index and holds almost 250 stocks. Technology companies are still sitting on cash hoards that can be deployed in ways to improve value with investors. We are already seeing an increase uptick in company share buybacks and tech firms are now even issuing dividends. The industry continues to grow through innovation as more shift to cloud, progress into artificial intelligence and adopt internet of all things devices
At the geographic level, IPK is suitable for conservative investors because nearly all of the ETF’s country exposures are developed markets. Japan and South Korea combine for over 54% of the ETF’s weight. Samsung is by far IPK’s largest individual holding at a weight of 15.2%. That is more than double the weight allocated to the ETF’s second-largest holding.
Semiconductors have historically outperformed during the summer months, returning 1.1% on average. However, that does not mean the sector is without risks. For example, President Donald Trump has pushed for restrictions on trade barriers with China, which might pose a threat to the sector. China is a key market for the global semiconductor industry, consuming more than $100 billion worth of semiconductors or roughly one-third of the world population.
IPK allocates almost 15% of its weight to semiconductor stocks, according to issuer data. Software is the ETF’s largest industry weight at 20.5%.
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