A Momentum Play on the Technology Sector

Jim Woods

Jim Woods has over 20 years of experience in the markets from working as a stockbroker, financial journalist, and money manager.

The Invesco DWA Technology Momentum ETF (PTF) provides an alternate take on U.S. technology firms.

PTF is unique because it selects and weights stocks by price momentum with a goal of outperforming the broad market. More specifically, PTF tracks the Nasdaq U.S. Benchmark Index that is composed of at least 30 common stocks of companies in the technology sector.

These stocks are selected based on a variety of investment merit criteria, including fundamental growth, stock valuation, investments and risk factors. Securities evaluated with the greatest capital appreciation potential are selected.

However, sometimes the fund’s focus on capturing pricing momentum can cause its holdings exposure to become skewed, with major sector bets and sizable allocations outside the traditional tech field.

A relatively high expense ratio of 0.60% and a somewhat weak daily trading volume have turned away some traders from PTF. However, experienced traders who pay attention to the fund’s spreads can still trade it effectively.

The growing U.S. economy and strong expansion in the technology sector have helped to fuel  PTF. So far this year, the fund has returned an impressive 14.31%, handily beating the S&P 500’s year to date return of 7.24%. PTF’s one-year’s return is 22.66%.

PTF’s share price rose from the $60 level to the $63-$64 level and neared its 52-week high following Apple’s strong second-quarter earnings report on July 31. On Aug. 16, PTF saw a small pullback after NVDA offered guidance that was weaker than anticipated in its quarterly report. PTF has held around the low $63 mark since then. Interested investors could consider using this pullback as a potential entry point.

Chart courtesy of Stockcharts.com

PTF’s top holdings are Apple (AAPL), 7.46%; Amphenol (APH), 6.48%; NVIDIA (NVDA), 5.57%; Paycom Software (PAYC), 4.74%; and Square (SQ), 3.91%.

Investors interested in a momentum play in the technology sphere can look to Invesco DWA Technology Momentum ETF (PTF) as a potential candidate.

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