Exchange-traded funds offer a convenient way to invest in sectors or niches that interest you. If you’d like to add some tech-heavy stocks to your portfolio, but don’t have the time or expertise to hand-pick a few, the SPDR Morgan Stanley Technology (ETF) (NYSEARCA:MTK) could save you a lot of trouble. Instead of trying to figure out which companies will perform best, you can use this technology ETF to invest in lots of them simultaneously.
ETFs often sport lower expense ratios than their mutual fund cousins. The technology ETF’s expense ratio — its annual fee — is a relatively low 0.50%. The fund is fairly small, too, so if you’re thinking of buying, beware of possibly large spreads between its bid and ask prices. Consider using a limit order if you want to buy in.
This technology ETF has performed reasonably well, inching ahead of the world market’s performance over the past three and 10 years, and beating it handily over the past five. As with most investments, of course, we can’t expect outstanding performances in every quarter or year. Investors with conviction need to wait for their holdings to deliver.
Why a technology ETF?
A technology ETF is an attractive prospect because our growing world population will demand more and better high-tech products and services over time, boosting the business of successful technology-oriented companies.
More than a handful of tech-heavy companies had strong performances over the past year. Finland-based Nokia Corporation (ADR) (NYSE:NOK) soared some 124%, which surely seems exciting. Still, despite that, it remains a penny stock. The company has been regaining its footing, providing developing economies with inexpensive mobile phones, and also partnering with Microsoft Corporation (NASDAQ:MSFT) on pricier phones. In fact, there was even talk that Nokia might sell its handset business to Microsoft, and focus on network infrastructure and services, though management has little interest in that. Nokia is coming out with new offerings, too, and, despite sporting net losses and negative free cash flow, it does have plenty of cash, even outstripping debt.
Network storage specialist NetApp Inc. (NASDAQ:NTAP), also held by this technology ETF, surged 38%. The company initiated a dividend this year, and it’s yielding 1.6%. The company’s operating system, ONTAP, has been rated well, and has gained market share, too. Some wonder whether NetApp might end up acquired by another major data player, such as Oracle Corporation (NASDAQ:ORCL), while others are hoping that an activist investor might help the company’s prospects. Meanwhile, the stock is significantly shorted, and the company has announced layoffs, and boosted its share buyback plans. It still looks attractive to some, in part due to strong free cash flow.
Corning Incorporated (NYSE:GLW), up 25%, has been enjoying solid demand for its Gorilla Glass, which generated more than $1 billion in 2012 revenue. Some have high hopes for its partnership with View and its tint-adjusting glass, and XXX. The company has hiked its dividend recently (it yields 2.7%), and gave a big boost to its share repurchase program, though buybacks don’t always turn out to have been good things. Corning’s forward P/E of 10 makes its stock seem attractively priced, though.