A Bullish View Of Apple ETFs
It is safe to say plenty of folks know that Apple (NASDAQ: AAPL), the largest U.S. company by market value, is introducing a new iPhone today.
Actually, it is possible that two new versions of the popular smartphone will be introduced to consumers. One is expected to be faster and have improved video display while the other will be more affordable for emerging markets consumers.
What is good for Apple can often be good for a plethora of ETFs. Over four percent of Apple's market capitalization is held by ETFs, which means no product announcements by the company have the potential to impact a slew of funds.
Related: ETFs Look To Break Post-iPhone Blues.
S&P Capital IQ "believes the company's fundamentals are strong, with room for double-digit revenue growth in FY 14
(Sep.) reflecting re-acceleration in iPhone and iPad revenues," said the research firm in a new note. "
S&P Capital IQ Analyst Scott Kessler "sees a potential partnership with China Mobile (NYSE: CHL) expanding Apple's prospects in the world's largest smartphone market, anticipates iPad update news within a month or so, and believes sentiment related to the company's shares and dividend policy will continue to improve. While the shares are up more than 25% since late-June lows, Kessler remains positive and has 12-month target price of $550."
S&P Captial IQ has favorable views on several ETFs with Apple exposure, including the PowerShares QQQ (NASDAQ: QQQ). Also referred to as the NASDAQ-100 tracking ETF, QQQ has a 13.3 percent weight to Apple, one of the largest among ETFs. QQQ's weight to Apple is nearly 600 basis points more than what the fund allocates to Microsoft (NASDAQ: MSFT), its second-largest holding. QQQ's Apple exposure is nearly double its weight to Google (NASDAQ: GOOG), the ETF's third-largest holding.
QQQ, which is the largest PowerShares by assets with $36.7 billion, is rated Overweight by S&P Capital IQ.
The Technology Select Sector SPDR (NYSE: XLK), the largest tech sector ETF by assets with $11.4 billion, also fits the bill as an "Apple ETF" with an almost 15.4 percent weight to the stock. That is almost double the weight XLK gives to Google. S&P Capital IQ rates XLK Overweight, but the ETF has been merely a middling performer among the nine sector SPDR ETFs this year.
"There are 66 equity ETFs that have a top-10 position in Apple, based on the latest holdings used by S&P Capital IQ. Looking at just Overweight-ranked ETFs, there are 46 of them," according to S&P Capital IQ.
Other broad market ETFs that feature Apple among their top holdings include the iShares Russell 1000 Growth ETF (NYSE: IWF), WisdomTree LargeCap Dividend Fund (NYSE: DLN) and the Vanguard Growth ETF (NYSE: VUG). S&P Capital IQ has Overweight ratings on all of those funds as well.
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Disclosure: Author does not own any of the securities mentioned here.
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