Best Performing Tech ETFs Of The Year

December 06, 2019

No matter how you slice it, 2019 is shaping up to be a banner year for stocks. As of the end of November, the S&P 500 had returned 27.6%, putting it on track for the second-best return of the past two decades (2013’s 32.4% return was the best).

As one would expect in such a phenomenal year for the market, most sectors within the S&P 500 are up nicely this year. Returns for the 11 sectors under the Global Industry Classification Standard are mostly in the 20-30% range. Only energy and health care have done worse than that, with returns of 5.4% and 16.4%, respectively, for the Energy Select Sector SPDR Fund (XLE) and the Health Care Select Sector SPDR Fund (XLV).

Meanwhile, only one sector has exceeded that range of returns, leapfrogging way ahead of the pack. The technology sector, as measured by the Technology Select Sector SPDR Fund (XLK), is up an eye-popping 43.7% this year, its best annual return since 2009, when stocks were recovering from the depths of the financial crisis.

In that year, XLK jumped 51.3%, but that was after a 41.5% drubbing in 2008. Other than that post-recession snapback, the only other time XLK rallied so much was in 1999, at the height of the dot-com bubble. That was the first full year of trading for XLK, which surged an astonishing 65.1% as the mania for internet-related tech stocks reached fever pitch.

Sector ETF Performance

Ticker Fund YTD Returns (%)
XLK Technology Select Sector SPDR Fund 43.7
XLI Industrials Select Sector SPDR Fund 29.4
XLF Financial Select Sector SPDR Fund 28.5
XLC Communication Services Select Sector SPDR Fund 28.2
XLRE Real Estate Select Sector SPDR Fund 27.2
XLY Consumer Discretionary Select Sector SPDR Fund 24.9
XLP Consumer Staples Select Sector SPDR Fund 24.4
XLU Utilities Select Sector SPDR Fund 21.9
XLB Materials Select Sector SPDR Fund 20.7
XLV Health Care Select Sector SPDR Fund 16.4
XLE Energy Select Sector SPDR Fund 5.4

Data measures total returns for the year-to-date period through Nov. 29.

 

Everything In Tech Is Working

The fact that XLK has only risen as much as it has this year on two other extraordinary occasions puts into perspective how impressive the current move is.  

Pretty much everything in tech has worked this year, from software firms to smartphone manufacturers to semiconductor companies.

Size hasn’t been a deterrent to lofty returns. The two biggest companies in the world based on market capitalization, Apple and Microsoft, are respectively up 72% and 51.3% this year, and each has a market value in excess of $1 trillion.

By design, the market-cap-weighted XLK holds oversized positions in these stocks—in fact, nearly 39% of its portfolio in those two companies alone.

Semis Outperforming

XLK, with its mega-cap tilt, turns out to be not only the best-performing ETF among SPDR’s suite of sector funds, but one of the best-performing tech ETFs of all.

It’s the sixth-best-performing fund on the list of unleveraged tech ETFs, outdone only by a handful of semiconductor ETFs and one momentum ETF.

The VanEck Vectors Semiconductor ETF (SMH), the SPDR S&P Semiconductor ETF (XSD), the iShares PHLX Semiconductor ETF (SOXX) and the First Trust Nasdaq Semiconductor ETF (FTXL) have each returned 50-53% this year—a bit better than the broader XLK.

Each of those ETFs holds a concentrated basket of semiconductor stocks, including Intel, Nvidia, Applied Materials, Lam Research, Texas Instruments and others.

 

(Use our stock finder tool to find an ETF’s allocation to a certain stock.)

 

The Invesco DWA Technology Momentum ETF (PTF)—the only unleveraged tech ETF that doesn’t exclusively focus on semis to outperform XLK this year—gained 44.2% on a year-to-date basis.

As its name suggests, PTF holds tech stocks with price momentum. It picks and chooses these stocks based on a Dorsey-Wright relatively strength index. Top holdings currently include RingCentral, Coupa Software, Cadence Design Systems, Broadcom and Adobe.

For a full list of this year’s 10 best-performing technology ETFs, see the table below:

Best-Performing Technology ETFs Of The Year (ex leveraged/inverse)

Ticker Fund YTD Returns (%)
SMH  VanEck Vectors Semiconductor ETF 52.3
XSD  SPDR S&P Semiconductor ETF 51.9
SOXX iShares PHLX Semiconductor ETF 50.5
FTXL  First Trust Nasdaq Semiconductor ETF 49.7
PTF  Invesco DWA Technology Momentum ETF 44.2
XLK  Technology Select Sector SPDR Fund 43.7
FTEC  Fidelity MSCI Information Technology Index ETF 43.2
VGT  Vanguard Information Technology ETF 42.9
PSI  Invesco Dynamic Semiconductors ETF 41.3
IXN  iShares Global Tech ETF 41.0

Data measures total returns for the year-to-date period through Nov. 29.

  

Email Sumit Roy at [email protected] or follow him on Twitter sumitroy2

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