Despite concerns over an elevated inflation and aggressive interest rate hikes, better-than-expected earnings of many tech giants have aided the stock market rally.
So, we think it could be wise to invest in tech-focused ETFs, iShares U.S. Tech Independence Focused ETF (IETC), First Trust Indxx Innovative Transaction & Process ETF (LEGR), and Innovator Growth-100 Power Buffer ETF - October (NOCT) to capitalize on the current market trends.
Last month’s economic data indicated that the economy has remained resilient with a robust jobs report and continued wage growth. To begin this month, investors are eyeing the announcements from the Federal Reserve and expects that the central bank to raise interest rates by another 0.25%, as it continues to fight stubborn inflation, which is well above its 2% goal.
On the other hand, better-than-expected earnings reports from many tech giants have kept investors’ sentiment positive lately. The tech-heavy Nasdaq Composite has gained 16.7% year-to-date.
Moreover, the fears of recession across the globe have compelled investors to flock towards technology’s cash-rich balance sheets and resistant revenue streams. These companies have strong balance sheets and robust profit margins, and are well-positioned to withstand a possible economic downturn.
With this in mind, let’s evaluate the fundamentals of the featured ETFs.
iShares U.S. Tech Independence Focused ETF (IETC)
IETC is a non-diversified ETF launched and managed by BlackRock, Inc. It provides access to U.S. companies with technology exposure, as classified using a proprietary classification system, while targeting increased exposure to U.S. firms with a greater proportion of technological capabilities, revenues, and production in the U.S. and select global markets relative to the proprietary classification system.
The fund’s top holdings include Microsoft Corporation (MSFT) with a 14.93% weight, Broadcom Inc. (AVGO) with an 11.70% weight, and Amazon.com, Inc. (AMZN) with a 6.66% weight. IETC has $127.04 million in AUM and 164 total holdings, with the top 10 assets comprising 58.94% of AUM. Its expense ratio of 0.18% compares to the category average of 0.56%.
It pays $0.44 annually as dividends, translating to a yield of 0.93% at the current price. IETC has a four-year average dividend yield of 0.80%. Also, its dividend payouts have increased at a CAGR of 15.9% over the past three years. It saw a net inflow of $18.80 million over the past six months.
IETC has gained 15.8% over the past six months to close the last trading session at $47.08. The fund’s NAV is $47.05 as of May 1, 2023.
IETC’s POWR Ratings reflect its promising prospects. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
It also has an A grade for Trade, Buy & Hold and Peer. IETC is ranked #21 in the list of 118 funds in the B-rated Technology Equities ETFs category. Click here to see all ratings for IETC.
First Trust Indxx Innovative Transaction & Process ETF (LEGR)
Launched and managed by First Trust Advisors L.P., LEGR is an ETF that invests 90% of its net assets in stocks of companies operating across information technology, blockchain technology sectors.
The index is designed to track the performance of companies that are either actively using, investing in, developing, or have products that are poised to benefit from blockchain technology and/or the potential for increased efficiency that it provides to various business processes.
LEGR has $115.64 million in assets under management. The fund has a total of 101 holdings that include MSFT with a 1.52% weighting, NVIDIA Corporation (NVDA) with 1.48%, Intel Corporation (INTC) with 1.47% weighting in the fund.
LEGR has an expense ratio of 0.65%, higher than the category average of 0.48%. Its net inflows came in at $76.46 million over the past three years. It has a NAV of $37.30 as of May 1, 2023.
The ETF pays a trailing-12-month dividend of $0.95, which yields 2.55% on the current price. Its dividend payouts have increased at a CAGR of 16.4% over the past three years. The fund has a four-year average yield of 1.88%.
Over the past six months, LEGR has gained 16.4% to close the last trading session at $37.30. It has a five-year beta of 0.55.
LEGR’s strong fundamentals are reflected in its POWR Ratings. It has an overall A rating which equates to a Strong Buy in our proprietary rating system.
The fund has an A grade for Trade, Buy & Hold, and Peer. It is ranked #22 of 118 ETFs in the same group. Click here to access all LEGR ratings.
Innovator Growth-100 Power Buffer ETF - October (NOCT)
NOCT seeks to provide returns that match those of the Invesco QQQ Trust (QQQ) while providing a buffer against the first 15% of Invesco QQQ Trust (QQQ) losses over a certain holding period. The actively-managed non-diversified fund invests at least 80% of its net assets in FLexible Exchange Options.
As of May 1, NOCT has $85.56 million AUM and a NAV of $39.70. Its expense ratio of 0.79% compares to the category average of 0.70%. Also, it has a five yearly beta of 0.55.
Over the past year, the fund’s net inflow came in at $15.59 million. NOCT has gained 12.6% over the past six months and 13.1% year-to-date to close its last trading session at $39.65.
It is no surprise that NOCT has an overall rating of A, which translates to Strong Buy in our POWR Ratings system. It has an A grade for Trade, Buy & Hold, and Peer. Within the same B-rated category, it is ranked #23. Click here to see all POWR Ratings for NOCT.
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IETC shares were trading at $46.87 per share on Tuesday morning, down $0.21 (-0.45%). Year-to-date, IETC has gained 15.25%, versus a 7.66% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
3 Tech ETFs Surpassing Investors Expectations StockNews.com
