Software ETF Rides Tech Sector's Resurgence | ETF Trends

Among the leaders of this year’s technology sector resurgence are software stocks and exchange traded funds (ETFs). Several software ETFs hit all-time highs Thursday, including the Invesco Dynamic Software ETF (NYSEArca: PSJ).

PSJ, a smart beta alternative to traditional cap-weighted software funds, jumped more than 2% Thursday, pushing its year-to-date gain to north of 23.50%.

PSJ follows the Dynamic Software Intellidex Index and is a smart beta alternative to traditional cap-weighted software ETFs.

That index “is designed to provide capital appreciation by thoroughly evaluating companies based on a variety of investment merit criteria, including: price momentum, earnings momentum, quality, management action, and value,” according to Invesco.

Software Sales Surge

Various data points and studies indicate sales across multiple software segments are expected to surge in the coming years.

“Games industry software/hardware combined revenue could drive well over $200 billion of revenue by 2023, and there was a record $5.7 billion investment in games companies in 2018,” reports TechCrunch.

Software demands in the wealth management space are also seen surging over the next several years.

“The global wealth management software market size is expected to reach USD 5.80 billion by 2025, registering a CAGR of 15.3% from 2019 to 2025, according to a new study conducted by Grand View Research, Inc.”

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The enterprise and global telecom software markets, fertile territories for many of PSJ’s 30 holdings, are also expected to see increasing demand. Cloud services, another important segment for PSJ holdings, is also booming. Oracle (NYSE: ORCL), one of PSJ’s largest holdings confirms as much.

“Oracle reported third-quarter revenue of $9.6 billion. Its total cloud services and license support revenue was $6.7 billion, representing 69% of revenue,” reports Forbes. “Oracle CEO Mark Hurd said revenue for the company’s Fusion human capital management, enterprise resource planning, supply chain, and manufacturing cloud applications grew 32% in the quarter compared with the year-ago quarter, and revenue for its NetSuite ERP cloud applications grew 30%. Oracle’s total net income increased to $2.7 billion.”

PSJ is a growth ETF as more than 85% of its holdings are classified as large-, mid- or small-cap growth stocks.

For more information thematic ETFs, visit our Thematic Investing 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.