Small-Cap Tech ETF Merits Consideration
Large-cap technology ETFs such as the Technology Select Sector SPDR (NYSE: XLK) and the Vanguard Information Technology ETF (NYSE: VGT) are popular with investors for a variety of reasons. Both are cheap with annual expense ratios of 0.18 percent and 0.14 percent, respectively.
Investors would do well, maybe even better, to consider a small-cap technology ETF to augment their large-cap exposure. The PowerShares S&P SmallCap Information Technology Portfolio (NASDAQ: PSCT) is the fund to consider.
"Small-cap ETFs saw inflows of $5 billion in July, while the broader information-technology sector took in $1.2 billion of new money," said S&P Capital IQ in a new research note, citing BlackRock data.
PSCT has been garnering some of those inflows. Since the fund was spotlighted on July 11, investors have poured nearly $25 million into the ETF, bringing its current assets under management tally to $177.5 million.
S&P Capital IQ, which rates PSCT Marketweight, said the ETF is "well-positioned based on our holdings analysis, and incurs relatively modest costs," while adding "PSCT is well-diversified at the holdings and industry level. The ETF offers exposure to 128 small-cap tech stocks."
PSCT holdings include Advanced Energy (NASDAQ: AEIS) ATMI (NASDAQ: ATMI), Microsemi (NASDAQ: MSCC), MKS Instruments (NASDAQ: MKSI) and TriQuint Semiconductor (NASDAQ: TQNT), all of which earn four-star ratings from S&P Capital IQ. Those stocks combine for nearly six percent of the ETF's weight.
"Small caps, in general, have been on a tear this year, outperforming their larger peers. The broader S&P SmallCap 600 Index, a measure of equities no larger than $4.1 billion, is higher by 22% this year through August 16, compared with nearly 16% for the large-cap S&P 500 and 18% for the S&P Mid-Cap 400. Info-tech small-cap stocks, however, have advanced 25% through August 16, supporting the view the theme has been popular recently," said S&P Capital IQ in the note.
Indeed, PSCT has been an impressive performer. Year-to-date, the fund is up 21.3 percent, more than double the returns offered by the large-cap focused XLK.
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Disclosure: Author owns none of the securities mentioned here.
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