The tech sector’s performance was downright tragic last year. The Fed’s hawkish tilt to tame still-elevated inflation and growing recessionary fears continue to induce pressure on the interest-rate-sensitive sector. Yet, it is well-poised for solid long-term growth, driven by high demand for tech solutions amid rapid digital transformation across various industries and rising IT spending.
Investors are provided with a window of opportunity to snap up leading tech ETFs KraneShares CICC China 5G & Semiconductor Index ETF (KFVG), FT Cboe Vest Nasdaq-100 Buffer ETF - June (QJUN), and Global X Internet of Things ETF (SNSR) at a discount for solid long-term returns.
The technology sector grapples with various macroeconomic headwinds, including persistently high inflation, the Fed’s hawkish stance, geopolitical instability, and the prospects of a slowing economy. This led to significant share-price declines across the sector.
However, the sector seems poised to witness considerable growth in the long term, driven by the growing adoption of cutting-edge digital solutions across several industries, including retail, automotive, healthcare, real estate, manufacturing, and others. Advanced technologies, such as cloud computing, artificial intelligence (AI), big data, and the Internet of Things (IoT), are experiencing robust demand.
Despite continued economic turbulence, tech spending will likely remain strong this year. According to the latest forecast by Gartner, Inc., worldwide IT spending is expected to reach $4.60 trillion in 2023, up 5.5% from the previous year.
“Macroeconomic headwinds are not slowing digital transformation. IT spending will remain strong, even as many countries are projected to have near-flat gross domestic product (GDP) growth and high inflation in 2023. Prioritization will be critical as CIOs look to optimize spend while using digital technology to transform the company’s value proposition, revenue and client interactions,” said John-David Lovelock, Distinguished VP Analyst at Gartner.
Based on a report by The Business Research Company, the global information technology market is estimated to reach $12 trillion by 2027, growing at a CAGR of 7.9%.
Given the backdrop, investors could consider investing in quality tech ETFs KFVG, QJUN, and SNSR, currently trading at discounts.
KraneShares CICC China 5G & Semiconductor Index ETF (KFVG)
KFVG seeks to track the performance of the CICC China 5G and Semiconductor Leaders Index. The Index measures the performance of companies engaged in the 5G and semiconductor-related businesses, including 5G equipment, semiconductors, electronic components, and big data centers.
The fund has $15.70 million in assets under management (AUM). Its top holdings are Foxconn Industrial Internet Co., Ltd. Class A with a 10.14% weighting, Xiaomi Corp. Class B at 7.13%, and Luxshare Precision Industry Co., Ltd. Class A and BOE Technology Group Co., Ltd. Class A at 7.04% and 5.32%, respectively. The fund has a total of 15 holdings.
KFVG has an expense ratio of 0.65%, compared to the category average of 0.64%. Its fund inflows were $3.97 thousand over the past month and $1.61 thousand over the past three months. Also, it has a beta of 0.49, indicating extremely low volatility compared to the broader market.
KFVG pays an annual dividend of $0.05, which yields 0.30% on the current price.
Over the past six months, KFVG has gained 30.7% to close the last trading session at $18.35. Also, it has gained 12.8% over the past month. The ETF had a NAV of $18.78 as of April 12, 2023.
KFVG’s POWR Ratings reflect this promising outlook. The ETF’s overall A rating equates to Strong Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
KFVG has an A grade for Trade, Buy & Hold, and Peer. Of the 118 ETFs in the B-rated Technology Equities ETFs group, it is ranked #28.
To access all of KFVG’s POWR Ratings, click here.
FT Cboe Vest Nasdaq-100 Buffer ETF - June (QJUN)
QJUN’s investment objective is to seek to provide investors that match the price return of the Invesco QQQ Trust SM, Series 1 (the “Underlying ETF”), up to a certain predetermined upside cap while providing a buffer against the first 10% of Underlying ETF losses, over a specific holding period. QJUN is an actively managed fund that holds options and collateral.
With $83 million in AUM, QJUN currently has two holdings in total, including OPTIONS with a 99.60% weighting and U.S. Dollar at 0.40%. In addition, the ETF has an expense ratio of 0.90%. Over the past year, the fund’s net inflows were $44.97 million. Its NAV was $20.41 as of April 13, 2023.
The fund has gained 9.2% over the past month and 15.8% over the past six months to close the last trading session at $20.38.
QJUN’s fundamental strength and strong outlook are reflected in its POWR Ratings. The ETF has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
QJUN has a grade of A for Trade, Buy & Hold, and Peer. It is ranked #30 out of 118 ETFs within the B-rated Technology Equities ETFs group.
Click here to see all the QJUN ratings.
Global X Internet of Things ETF (SNSR)
SNSR makes investments in companies that stand to potentially benefit from the adoption of the Internet of Things (IoT), as enabled by technologies such as 5G telecommunications infrastructure, Wi-Fi, and fiber optics. This also includes the manufacturing of semiconductors and sensors; integrated products and solutions; and applications serving smart grids, connected cars, and the industrial internet.
SNSR tracks the Indxx Global Internet of Things Thematic Index. It has an AUM of $346.20 million. The fund has a total of 55 holdings. Its top holdings include STMicroelectronics NV (STM) with a 6.52% weighting, Garmin Ltd. (GRMN) at 6.06%, Skyworks Solutions, Inc. (SWKS) at 5.96%, and Advantech Co., Ltd. with 5.82% weighting.
The fund has an expense ratio of 0.68%, higher than the category average of 0.56%. SNSR’s fund inflows came in at $18.78 million over the past month and $22.28 million over the past three months. The ETF’s P/E ratio of 20.66 compares with the category average of 13.92.
Also, SNSR has a beta of 0.04, indicating extremely low volatility compared to the broader market. The ETF pays an annual dividend of $0.24, yielding 0.74% on the current share price. It has paid dividends for five consecutive years. Its NAV was $32.45 as of April 13, 2023.
SNSR has gained 27% over the past six months and 4.6% over the past year to close the last trading session at $32.57.
SNSR’s POWR Ratings reflect this strong outlook. The ETF’s overall A rating equates to a Strong Buy in our proprietary rating system.
SNSR has a grade of A for Trade and Buy & Hold and a B for Peer. In the same ETF group, it is ranked #16.
To access all SNSR’s POWR Ratings, click here.
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KFVG shares were trading at $18.35 per share on Friday morning, down $0.42 (-2.24%). Year-to-date, KFVG has gained 19.66%, versus a 8.41% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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