Exchange Traded Funds (ETFs)

This ‘Stay-At-Home’ Tech Fund Offers Targeted Exposure

(Note: Today’s ETF Talk is the first in a series of funds designed to profit from the “stay-at-home” trend in COVID-19 America.)

There is an emerging trend of relatively new exchange-traded funds (ETFs) that are looking to capitalize on specific investment ideas targeting growth companies with strong potential.

One of these funds, launched in 2016, is the SPDR FactSet Innovative Technology ETF (XITK). The strategy of this fund is to invest in technology and electronic media companies that are considered innovative or disruptive.

Companies can be considered “innovative” if they belong to technology subsectors with top revenue growth characteristics. This is a relatively high-risk type of investment, as growth-oriented tech companies are often prone to fluctuations in value.

XITK’s performance has been volatile. Since it launched, it was up about 160% over four years prior to the coronavirus-induced meltdown in the market starting in February. Now, the fund’s 12-month performance clocks in at around zero, while it is still up 118% since inception.

Assets under management are low at just under $57 million. While this means the fund falls below my recommended threshold for investment, its strategy is an interesting one worth bringing to your attention. The expense ratio of 0.45% is not too high compared to other funds of this general nature. The fund has a tiny 0.15% yield.

Chart courtesy of StockCharts.com

XITK’s holdings are primarily based in the software and information technology subsector. However, other sectors are represented, such as semiconductor makers and media companies. Although the fund strives to equally weight its 99 holdings, in the short term, allocation percentages can change due to increases or decreases in asset value until the fund rebalances itself.

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Accordingly, its largest position is currently Zoom Video Communications (NASDAQ:ZM), which has rocketed upward due to increased usage during the COVID-19 outbreak.

For investors seeking innovative solutions for their portfolios and a chance to invest in a basket of growth-oriented companies that are positioned to benefit from the “stay-at-home” trend, the SPDR FactSet Innovative Technology ETF (XITK) could be worth considering as an investment or a good source for stock ideas.

As always, I am happy to answer any of your questions about ETFs, so do not hesitate to send me an email. You just may see your question answered in a future ETF Talk.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Successful Investing, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.