Despite a tough time for tech stocks during the past month, the top-performing technology funds this year are beating the broader market by a wide margin.
All the exchange traded funds making the accompanying table have yielded at least triple the performance of the S&P 500 on a year-to-date basis. And most of those with a longer track record have scored market-beating double-digit gains too.
First Trust Dow Jones Internet (FDN) came out on top with a 27.5% YTD gain, far ahead of the S&P 500’s 3.4% return. Its average annual returns of 27.6% and 24.6% over the past three and five years, respectively, also outpace the S&P’s 11.9% and 13.2% gains for the same periods.
Shares are extended from a buy point cleared in May and are back near record highs. The $9 billion fund tracks the Dow Jones Internet Composite Index. The index is composed of companies that generate at least 50% of their revenue from the internet. They must have a three-month average market cap of $100 million or more. FDN carries a 0.53% expense ratio.
Information technology accounted for the biggest sector weight as of July 5, at nearly 70% of assets. Consumer discretionary was next at about 21%. Financials, telecommunication services and health care made up less than 5% each. The top five holdings — Amazon (AMZN), Facebook (FB), Netflix (NFLX), Salesforce.com (CRM) and Alphabet (GOOGL) — represented 35% of the 42-stock portfolio.
A pair of ARK Invest funds came in second and third. ARK Innovation (ARKK) returned 23.4% YTD and has produced a three-year average annual return of 30.7%. The $1.1 billion fund invests in companies poised to benefit from developments in genomics, next-generation internet and industrial innovation. Top holdings in ARKK include electric automaker Tesla (TSLA), 3D printer maker Stratasys (SSYS), biotech Intellia Therapeutics (NTLA) and messaging platform Twitter (TWTR).
On Cloud Nine?
ARK Web x. 0 (ARKW) placed third with a 21.8% YTD gain and boasts a three-year average annual return of 36.6%. The $639.4 million fund targets companies expected to benefit as technology infrastructure shifts to the cloud. Cloud computing and cybersecurity plays accounted for 22% of assets, e-commerce about 22%, and big data and machine learning nearly 20%. Digital media, mobile and Internet of Things made up a respective 9%, 9% and 8%.
Tesla and Twitter were among top holdings in ARKW, along with Amazon, point-of-sale software provider Square (SQ) and graphics chip designer Nvidia (NVDA). Both of the actively managed funds (ARKK and ARKW) charge a 0.75% expense ratio.
In fourth was iShares North American Tech-Software (IGV), with a 20.5% YTD gain. Its three- and five-year average annual returns were 23.7% and 22.2%, respectively. The $1.9 billion fund’s top five holdings as of July 5 consisted of Salesforce, Microsoft (MSFT), Adobe Systems (ADBE), Oracle (ORCL) and Activision Blizzard (ATVI). Together, they represented 40.5% of the 64-stock portfolio. IGV’s expense ratio is 0.48%. The fund is featured in this week’s ETF Leaders column.
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