Making Money Alert
ETF Talk: Apple Sweetens up Technology ETF
01/25/2012
Apple’s blockbuster earnings announcement late yesterday showed that consumers still have a voracious appetite for the newest gadgets. To profit from that trend, consider buying Technology Select Sector SPDR Fund (XLK).
Thanks in large part to the sale of 37 million iPhones in the fourth quarter of 2011, Apple today became the world’s largest company, based on market capitalization. Apple’s intraday high price today put its market value at $423.7 billion, up 8% from $391.9 billion yesterday, surpassing Exxon Mobil’s market value of $416.5 billion achieved when it reached its high in today’s trading.
With more than $97.6 billion in cash on its balance sheet, Apple is well positioned to pay a significant dividend or to buy back some of its own shares later this year. With those prospects in mind, the Technology SPDR XLK could be a good addition to your portfolio. If you think the lift Apple is giving to technology-sector ETFs is ending, I want to point out that Goldman Sachs analyst Bill Shope raised his 12-month forecast on the company’s shares to $600 from $550. As of this writing Apple was trading around $447.
Here is a bit of additional detail about the Technology Select Sector SPDR Fund. Before expenses, the fund seeks to closely match the returns and characteristics of the Technology Select Sector Index (ticker: IXT). The largest component of XLK, without question, is Apple, accounting for 14.79%. IBM is a distant second with 8.56%. Other top holdings include Microsoft, 8.31%; AT&T Inc, 6.75%; Google, 5.55%; and Intel, 4.42%.
When deciding to own an ETF that has Apple as a major component, keep in mind the following. The ETF likely will underperform, compared to the meteoric rise of owning just Apple shares. On the flipside, your portfolio should be less volatile, since you are holding a basket of stocks rather than just one.
If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please check out my ETF Trader service. As always, I am pleased to answer your questions about ETFs, so do not hesitate to email me by clicking here. You just may see your question answered in a future ETF Talk.