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Google’s Weight In Your Tech ETF

15 July 2011 at 2:36 pm by Gary Gordon     Bookmark and Share    Follow EtfExpert on Twitter

There are plenty of analysts who have questioned whether or not Google (GOOG) could sustain a double-digit growth rate going forward. Yet the tech giant’s 32% revenue¬†burst in the current quarter not only quieted the naysayers, it sent share prices up 13% in a single trading session.

Not sure about those annoying click-through links? The average price paid per¬†click on Google’s network rose 12% over last year. Don’t believe that the Google Plus social networking¬†plan can compete with Facebook? “G Plus” brought in 10 million newbies in its first 2 weeks!

Granted, the ultimate Internet information provider is still -6% below 2011 highs and roughly -23% off of the October 2007 peak. That said, those who declared Google a dinosaur may have been premature.

Here are 7 of the more popular tech ETFs with their applicable Google weightings:

7 Popular Tech ETFs With Google In The Mix    
               
      GOOG Weight 1-day %   YOY %
               
iShares Global Tech (IXN) 4.5%   1.0%   17.8%
SPDR Tech Sector (XLK) 5.0%   1.1%   23.1%
PowerShares Nasdaq 100 (QQQ) 5.1%   1.1%   31.2%
Vanguard Info Tech (VGT) 5.4%   1.3%   23.8%
iShares DJ U.S. Tech (IYW) 5.7%   1.4%   21.4%
PowerShares Ndaq Internet (PNQI) 8.2%   2.2%   52.3%
First Trust Internet (FDN) 8.5%   1.9%   46.1%

 

Based on the higher performance figures for Internet-related ETFs, one might leap to the conclusion that Google exposure had been a big reason for the boost. In actuality, Google (GOOG) gained 30% year-over-year, whereas FDN and PNQI packed on 46% and 52% respectively. Even the Nasdaq 100 proxy, QQQ, has had a slight edge.

Google shares have been far more volatile than any of the above-mentioned ETFs over the past 5 years. Moreover, investors often prefer ETFs to diversify away from single stock risk. It follows that if Internet stocks scare you, you might not want to travel the sub-sector path; both FDN and PNQI have a great deal riding on Google (GOOG), Amazon (AMZN) as well as eBay (EBAY).

On the flip side,¬†exactly one year ago to the day, I offered, “Three ETFs With Trend-Busting Street Credentials.” In the July 15, 2010 feature, I explained why First Trust Internet (FDN) was on my “buy list.”

Naturally, investing in an Internet ETF requires some belief in a 2.0 wave. Yet, more importantly, you need to manage your downside risk with stop-limit loss orders. Without an exit strategy, the most devout believer shrinks like a violet in a garden of roses.

You can listen to the¬†ETF Expert Radio¬†Show¬†‚ÄúLIVE‚ÄĚ,¬†via podcast or on your iPod.¬†You can review more ETF Expert features here.

Disclosure Statement: ETF Expert¬†is a web log (‚ÄĚblog‚ÄĚ) that makes the world of ETFs easier to understand. Gary Gordon, MS, CFP is the president of Pacific Park Financial, Inc., a Registered Investment Adviser with the SEC. Gary Gordon, Pacific Park Financial, Inc, and/or its clients may hold positions in the ETFs, mutual funds, and/or any investment asset mentioned above. The commentary does not constitute individualized investment advice. The opinions offered herein are not personalized recommendations to buy, sell or hold securities. At times, issuers of exchange-traded products compensate Pacific Park Financial, Inc. or its subsidiaries for advertising at the ETF Expert web site. ETF Expert content is created independently of any advertising relationships. You may review additional ETF Expert disclosure details here.

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