ETF Talk: The Ultra-Attractive Tech Sector

Doug Fabian

Doug Fabian is known for his expert knowledge of ETFs, bear funds and enhanced index funds to profit in any market climate.

Late last month, Apple set a new record as the most valuable company in stock-market history, passing $664 per share. Despite a lukewarm performance since then, this achievement has caused many investors to revisit the tech sector. As a result, one exchange-traded fund (ETF) that you may want to consider is the ProShares Ultra Technology (ROM), which is designed to provide investors with the opportunity to track the performance of technology stocks.

ROM has performed well in 2012. After starting the year at $60.58, the fund rose to hit $88.68 on April 2. As the chart below shows, the fund has been trading in the $80 range lately. It closed at $80.43 on Sept. 4, up 32.77%, year-to-date.

The ProShares Ultra Technology (ROM) ETF seeks daily investment results, before fees and expenses, that correspond to twice the daily performance of the Dow Jones U.S. Technology Index. As of Sept. 4, ROM’s top five holdings were Apple Inc. (AAPL), 24.99%; Microsoft (MSFT), 9.07%; International Business Machine (IBM), 6.67%; Google Inc. (GOOG), 4.64; and Intel Corp. (INTC), 4.15%. The fund continues to sell at a slight premium to its net asset value (NAV) of $80.46 per share.

As indicated, ROM’s primary holdings are giants of the tech industry. The fund’s major holding in AAPL indicates that ROM could be uniquely positioned to capitalize on Apple’s success. However, the fund does present some risk. Because it is entirely invested in technology stocks, the fund’s value is at the mercy of the industry and exposes its investors to losses if the sector sells off. However, if technology stocks continue to perform as they have been, ROM presents a significant investment opportunity.

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If you want my advice about buying and selling specific ETFs, including appropriate stop losses, please consider subscribing to my ETF Trader service. As always, I am happy to answer your questions about ETFs, so do not hesitate to email me by clicking here. You may see your question answered in a future ETF Talk.

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