The chasm between the haves and the have-nots has seldom been wider than it’s been in 2020.
In contrast to the millions of small businesses that were devasted by the COVID-19 pandemic, the large companies that make up the U.S. stock market ended up being net beneficiaries of this year’s unfortunate events.
For these corporations, the enormous amounts of fiscal and monetary stimulus unleashed by the government were able to more than offset a deep, but brief, slump in the economy.
The S&P 500 currently trades near record highs, and within the index, no sector has done better than technology. The group, as measured by the Technology Select Sector SPDR Fund (XLK), is up a whopping 37% in the year-to-date period through Dec. 14.
In many cases, technology companies have seen their businesses accelerated by the pandemic. Videoconferencing software and mobile payments are two examples of technologies that have become ubiquitous overnight, enriching tech companies like Zoom Video Communications, RingCentral, PayPal, Square and others.
Zoom is up a whopping 487% year-to-date, RingCentral is up 109%; PayPal is up 105%; and Square is up 252%.
Some of these pandemic winners make an appearance in the aforementioned XLK, but they are more heavily weighted in other tech ETFs (XLK, which tracks tech stocks within the S&P 500, is dominated by Apple and Microsoft, which together make up 43% of its portfolio).
(Use our stock finder tool to find an ETF’s allocation to a certain stock.)
Here are the 15 best-performing tech ETFs of the year:
Top Performing Technology ETFs (ex. leveraged/inverse)
|ARKW||ARK Next Generation Internet ETF||149.64%|
|OGIG||O'Shares Global Internet Giants ETF||102.29%|
|ARKF||ARK Fintech Innovation ETF||100.96%|
|WCLD||WisdomTree Cloud Computing Fund||98.63%|
|XWEB||SPDR S&P Internet ETF||84.79%|
|XITK||SPDR FactSet Innovative Technology ETF||80.85%|
|FDNI||First Trust Dow Jones International Internet ETF||79.71%|
|LOUP||Innovator Loup Frontier Tech ETF||79.66%|
|EMQQ||Emerging Markets Internet & Ecommerce ETF||75.41%|
|SOCL||Global X Social Media ETF||74.60%|
|PTF||Invesco DWA Technology Momentum ETF||70.27%|
|CLOU||Global X Cloud Computing ETF||66.76%|
|XNTK||SPDR S&P NYSE Technology ETF||65.90%|
|PNQI||Invesco NASDAQ Internet ETF||59.80%|
|BLOK||Amplify Transformational Data Sharing ETF||57.76%|
|KWEB||KraneShares CSI China Internet ETF||56.78%|
Data measures total returns for the year-to-date period through Dec. 11, 2020
Blazing Hot Internet ETFs
Far and away the best-performing tech ETF this year is the ARK Next Generation Internet ETF (ARKW), with a 149.6% gain. ARKW shares a commonality with other top tech ETFs; that is, it uses a much broader definition of what a technology stock is compared to, say, than the Global Industry Classification Standard (GICS) that is used by index providers S&P and MSCI.
For example, ARKW’s top two holding are currently Tesla and Roku, two stocks that aren’t in XLK. The fund also has a sizable 5% stake in the high-flying payments company Square.
Indeed, many of the best-performing tech ETFs focus on internet stocks, a group that, under the GICS, straddles multiple traditional sectors. But in thematic internet ETFs, all these stocks come together. And at least this year, it makes perfect sense why they should fit together. Internet-enabled companies have thrived, almost across the board, as people have been working, playing and shopping at home.
OGIG’s top holdings currently include Amazon, Alibaba and Alphabet, while XWEB’s top three positions are Magnite, Stitch Fix and Snap.
Other Double Returns
ARKW isn’t the only tech ETF from issuer ARK that’s performed phenomenally this year. The ARK Fintech Innovation ETF (ARKF) has also more than doubled, gaining about 101% in the year-to-date period.
ARKF’s focus is the financial technology, or fintech, space. It has some overlap with ARKW—Square, with a 10.8% weighting, is the fund’s largest holding. But it’s much more focused on companies innovating in the finance space, including companies developing payment technologies, mobile wallets, online lending solutions and more.
MercadoLibre, Adyen and Tencent are a few other top holdings of the fund.
Finally, the WisdomTree Cloud Computing Fund (WCLD) is another blazing hot tech ETF worth pointing out. With its 98.6% year-to-date gain, WCLD is No. 4 on the top tech ETF list.
This is a fund that’s hyperfocused on the cloud computing megatrend, where computing and storage resources are increasingly being delivered through the internet. Most of the companies in this ETF are enterprise software companies that deliver their software through the cloud—otherwise known as software-as-a-service (SaaS).
SaaS is typically delivered on a subscription basis, making it a predictable business model. In addition to being predictable, many SaaS businesses have accelerated, thanks to the pandemic. Think about a customer service software company like Zendesk, a cybersecurity software company like CrowdStrike or a collaboration software company like Smartsheet—they’re needed more than ever with people working from home.
To be added to WCLD, a company must have revenue growth of at least 15%. The rival Global X Cloud Computing ETF (CLOU), which is up a lesser-but-still-impressive 66.8%, has no such revenue screen.