ETFs: A Potential “Super Sector” For 2011 (IXN, QQQQ, XLK, IAH, IGV, SWH, HHH, IGW, XSD, IIH, ROM, TYH)

Unless you’ve been living in a cave for the past ten years, you know that Technology and its growth have been the big economic and social story of our times. From the dawn of the personal computer in Steven Jobs’s garage to the iPhone, we have seen literally centuries of progress made in the just the span of a few years. 

In recent days, blowout earnings reports from the likes of Apple, Google, IBM and Advanced Micro Devices point to the potential for another strong year for the tech sector, and ETFs offer a convenient and potentially lucrative way to participate in this powerful “Super Sector.” 

In my book, Super Sectors: How to Outsmart the Market Using Sector Rotation and ETF,  I identify and discuss five “super sectors’ that are likely to outperform the general markets due to vast sociological and demographic changes that will be sweeping over our world during the next five years. 

One of those sectors is Technology and there can be no question that technology has been more than the equivalent of the Industrial Revolution and that Bill Gates and Michael Dell and Larry Ellison are the Rockefellers, Carnegies and Mellons of our day. 

I’m old enough to remember the dawn of television and the first transistor radios and digital watches, and the progress since those “Leave It to Beaver” days has been nothing short of breathtaking. 

The personal computer, internet and smart phones are the equivalent of the steam engine, the Model T and the assembly line, and, like then, many fortunes have been made in recent years on these emerging technologies. 

While some say that all the big money has been made and that the pace of change and innovation has to slow down, I believe that we’re still in the very early days of the “Technology Revolution” and that many more opportunities still lie ahead. 

For investors, I believe that exchange traded funds offer one of the best ways to participate in this dynamic sector.  You can participate in broad tech indexes like the NASDAQ 100 or Semiconductors or you can delve into specified and special sub sectors like bio tech, internet, semiconductors, software or broadband. 

Plus in today’s ever expanding world of exchange traded funds, aggressive investors can find opportunities in leveraged technology funds that provide 2X and even 3X returns over the underlying indexes. 

Here’s a quick overview of some of my favorite ETFs in the technology sector: 

Broad Index ETFS 

iShares S&P Global Technology Sector Index Fund (NYSE:IXN):  Broad global index fund that tracks the S&P Global Technology Index 

PowerShares QQQ (NASDAQ:QQQQ): Widely traded ETF that tracks the NASDAQ 100 Index 

Technology Select Sector SPDR Fund (NYSE:XLK):  ETF with its largest holdings centered in tech companies like Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), International Business Machines (NYSE:IBM), Google (NASDAQ:GOOG) Oracle (NASDAQ:ORCL), Intel (NASDAQ:INTC) and others. 

Hardware ETFs: 

Merrill Lynch Internet Architecture HOLDRs (NYSE:IAH) 

Software ETFs:  

iShares S&P GSTI Software Index Fund (NYSE:IGV) 

Merrill Lynch Software HOLDRs (NYSE:SWH) 

Semiconductors ETFs:

iShares S&P GSTI Semiconductor Index Fund (NYSE:IGW)
SPDR S&P Semiconductor ETF (NYSE:XSD) 

Internet and Technology Services ETFs

Merrill Lynch Internet HOLDRs (NYSE:HHH)

Merrill Lynch Internet Infrastructure HOLDRs (NYSE:IIH) 

Leveraged Technology ETFs

ProShares Ultra Technology ETF (NYSE:ROM): offers daily 200% leverage to the Dow Jones Technology Index 

Direxion Daily Technology Bull 3X: (NYSE:TYH): offers 300% leverage to the price performance of the Russell 1000 Technology Index 

This list could go on and on as exchange traded funds providers rush to provide investors with a seemingly never ending array of new products, particularly in hot sectors like technology. 

And I believe that this sector will remain hot because who among us could survive without our internet connection or cell phone?  When times get tough, we can cut back on dining out or taking a vacation, but if your laptop or cell phone dies, you have to replace them virtually on that very day. 

For us as investors, once again, Exchange Traded Funds offer an almost unlimited array of investment possibilities.  We can easily get exposure to general technology funds, semiconductors, software, hardware or broadband and we can just as easily drill down into subsectors like biotech and nanotechnology. 

The ride won’t be straight up and it won’t necessarily be easy, but for investors and traders with just the simplest systems, the potential could be enormous.  Plus, with Exchange Traded Funds, you don’t have to pick the next Apple or Microsoft because quite likely you’ll already find it residing in one of the ETFs that you might choose. Learn more at Super

 Disclosure: No positions in any ETFs or stocks mentioned.  Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.

Written By John Nyaradi Publisher of Wall Street Sector Selector    

John Nyaradi is Publisher of Wall Street Sector Selector and Senior Vice President of Private Client Services for ProfitScore Capital Management, Inc.  Get a free Special Report from Wall Street Sector Selector

Leave a Reply

Your email address will not be published. Required fields are marked *