Written by Ky Trang Ho ,CONTRIBUTOR
I cover investing strategies and trends in ETFs and mutual funds.
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12/20/15
Technology stocks outperformed the stock market this year. Some massive trends should continue firing up the tech sector in 2016 and beyond.
The Technology Select Sector SPDR exchange-traded fund (XLK) and Vanguard Information Technology ETF (VGT) — the two largest tech ETFs — both returned about 3% in this year while the SPDR S&P 500 ETF (SPY) lost 0.7%, according to Morningstar. The biggest drivers in both ETFs were Microsoft (MSFT), +19% gain year to date; Facebook (FB), +33%; and Alphabet (GOOGL), +43%. Apple (AAPL), the biggest holding in both ETFs, shed 2%.
iShares North American Tech-Software (IGV) surged 10% this year. Microsoft (MSFT), +19% year to date; Adobe (ADBE), + 26%; and Salesfore.com (CFM), +30%, led the charge.
Based on fourth-quarter estimates and actual results earlier this year, the technology sector’s sales growth was almost nonexistent at +0.1%, according to FactSet. But it was superior to the S&P 500 (SPY)’s, 3.4% dip.
A part of the tech sector’s earnings growth can be attributed to share buybacks. Repurchases reduce the number of shares outstanding over which earnings are divided, thereby increasing earnings per share.
