Market Overview

Too Much Apple, Not Enough Priceline In ETFs?


Two things are undeniable about the way things have shaken out in the technology sector in 2012. First the obvious: Apple (Nasdaq: AAPL) continues to enjoy a run that is unprecedented and even that doesn't do it justice. Not surprisingly, this has created a good news/bad news scenario for scores of mutual funds and ETFs that are heavily allocated to the iPad and iPhone manufacturer.

The second undeniable fact is that (Nasdaq: PCLN) has offered better returns than Apple has year-to-date. With a little less than an hour left in the trading day on Monday, Priceline now has a market value just north of $38 billion.

As CNBC's Herb Greenberg astutely noted earlier today, Priceline's market value is now greater than the major U.S.-based airlines combined or the major U.S. hotel chains combined. Of course, that's interesting because Connecticut-based Priceline is the avenue by which many folks book reservations on those airlines and at those hotels.

And maybe Priceline's current outpacing of Apple begs the question: Where was the Priceline Negotiator when it came time to decide the stocks allocations in ETFs? Said differently, if it can be argued that some ETFs, think the PowerShares QQQ (Nasdaq: QQQ) and the iShares Dow Jones US Technology Index Fund (NYSE: IYW) just to name a pair, are over-exposed to Apple are tech ETFs under-exposed to Priceline?

If the answer isn't a solid "yes" or "no," then at the very at least the answer speaks to the flaw of so many ETFs relying on market-cap weighted indexes. That is essentially how the obscene weights to Apple in some ETFs come about and that's exactly how Priceline can go sort of unloved in the exchange-traded products universe.

In our most recent ETF Showdown, we highlighted two of the best ETF options for Priceine exposure noting that the First Trust Dow Jones Internet Index Fund (NYSE: FDN) and the PowerShares NASDAQ Internet Portfolio (Nasdaq: PNQI) boast two of the largest Priceline allocations among ETFs.

As of April 5, Priceline was FDN's third-largest holding at almost 6.4% of the fund's weight. On the same day, Priceline was PNQI's top holding at 9.3%. Guess what ETF has performed better year-to-date.

At the start of trading today, the PowerShares Dynamic Leisure & Entertainment Portfolio (NYSE: PEJ) was up 17% to start 2012 and Priceline was that ETF's largest holding with a weight of 6%. The PowerShares DWA Technical Leaders Portfolio (NYSE: PDP) gives its top two spots to Apple and Priceline at 3.19% and 3.12%, respectively.

Like it or not, when stocks trade at the price tags that Apple and Priceline trade at, investors turn to ETFs and mutual funds for proxies on those stocks. So if Priceline heads to $850-$900 a share, maybe then will more folks crow about it not being prominent enough in ETFs.

Posted-In: Long Ideas News Sector ETFs Broad U.S. Equity ETFs Short Ideas Technicals Intraday Update After-Hours Center Best of Benzinga


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