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All eyes are on technology giant Apple (NASDAQ: AAPL), which is set to release second-quarter fiscal 2024 results after market close on May 2.

Will Apple Beat on Q2 Earnings Amid iPhone Slump? ETFs in Focus

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There&#39;s no shortage of commentary and concern regarding the size of the S&amp;P 500&#39;s top several names and their influence on the broader market.

A Low-Cost, FAAMNG-Heavy ETF For May

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Vanguard Has Its Say In ETF Fee War

All eyes are on technology giant Apple (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/aapl#NASDAQ">AAPL</a>), which is set to release second-quarter fiscal 2024 results after market close on May 2. Since Apple accounts for nearly 7% of the total market capitalization of the entire technology sector on the S&amp;P 500 Index, it is worth taking a look at its fundamentals ahead of its quarterly results. 
Apple shares are down about 7.6% over the past three months, underperforming the industry&#39;s decline of 3.9%. The trend is expected to reverse, given that the tech giant has a reasonable chance to beat earnings estimates. It saw positive earnings estimate revision activity, which is generally a precursor to an earnings beat. 
This has put investors&#39; focus on ETFs having the largest allocation to the tech titan. Technology Select Sector SPDR Fund (ARCA:XLK), Vanguard Information Technology ETF (ARCA:VGT), MSCI Information Technology Index ETF (ARCA:FTEC), iShares US Technology ETF (ARCA:IYW) and Vanguard Mega Cap Growth ETF (ARCA:MGK) have Apple as the top or second firm with a double-digit allocation and sport a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy).
<h3>Inside Our Methodology</h3>
Apple has an Earnings ESP of +0.93% and a Zacks Rank #3 (Hold). According to our methodology, the combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 increases the chances of an earnings beat. 
Apple saw a positive earnings estimate revision of a penny over the past 30 days for the fiscal second quarter. Analysts raising estimates right before earnings &mdash; with the most up-to-date information possible &mdash; is a good indicator for the stock. The Zacks Consensus Estimate indicates modest year-over-year decline of 0.7% for earnings and 5.1% for revenues. The company has a strong track record of positive earnings surprises. It delivered an average earnings surprise of 5.20% in the trailing four quarters. 
The stock has a top Growth Score of A. It currently has an average brokerage recommendation&nbsp;of 1.73 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 28 brokerage firms. The current ABR compares to an ABR of 1.80 a month ago based on 28 recommendations. Of the 28 recommendations deriving the current ABR, 17 are Strong Buy and three are Buy. Strong Buy and Buy, respectively, account for 60.71% and 10.71% of all recommendations. A month ago, Strong Buy made up 57.14%, while Buy represented 10.71%. 
Based on short-term price targets offered by 28 analysts, the average price target for Apple comes to $204.88. The forecasts range from a low of $158.00 to a high of $250.00.
<h3>What to Watch</h3>
On the last earnings call, the tech giant offered a cautious outlook for the ongoing quarter. Apple CFO Luca Maestri indicated that iPhone sales in the March quarter would be similar to last year&#39;s $51.33 billion in revenues. This excludes $5 billion in sales attributed to outperformance a year ago as supply recovered from COVID-19 shutdowns and caught up with demand.
<h3>Are Apple iPhone Sales a Concern?</h3>
Apple stock has been struggling with concerns about iPhone sales, particularly in China. Sales of its flagship product are facing significant headwinds in the crucial Chinese market due to rising competition from domestic smartphone makers as well as national security concerns. Additionally, consumers globally are holding their iPhone devices for longer before upgrading, further weighing on demand and sales growth. 
According to the preliminary data from research firm IDC, Apple lost its crown to South Korean rival Samsung as the world&#39;s biggest mobile phone seller after its shipments fell about 10% in the quarter ended March. Samsung retook the lead in the global market with a 20.8% share, beating Apple&#39;s 17.3% share, which has been dented by slowing sales in China. 
IDC revealed that Apple shipped 50.1 million iPhones in the quarter ended March, down from the 55.4 million units in the year-ago quarter. It was the biggest drop in iPhone sales since COVID-19 lockdowns caused global supply chain chaos in 2022. A separate new report from market research firm Counterpoint Research shows that Apple&#39;s iPhone sales dropped sharply by 19.1% year over year in the quarter ended March in China amid strong competition from domestic brand Huawei.
<h3>ETFs in Focus</h3>
Technology Select Sector SPDR Fund 
Technology Select Sector SPDR Fund targets the broad technology sector and follows the Technology Select Sector Index. It holds about 65 securities in its basket, with Apple making up 20.3% share. Technology Select Sector SPDR Fund has key holdings in software, semiconductors and semiconductor equipment, and technology hardware, storage and peripherals. 
Technology Select Sector SPDR Fund is the most popular and heavily traded ETF, with an AUM of $62.7 billion and an average daily volume of 7 million shares. The fund charges 9 bps in fees per year. 
Vanguard Information Technology ETF 
Vanguard Information Technology ETF manages $62.6 billion in its asset base and provides exposure to 313 technology stocks. It currently tracks the MSCI US Investable Market Information Technology 25/50 Index. Here, Apple accounts for a 15.4% share. Semiconductors, systems software, technology hardware storage &amp; peripheral, and application software are the top four sectors. 
Vanguard Information Technology ETF has an expense ratio of 0.10%, whereas volume is solid at nearly 433,000 shares. 
MSCI Information Technology Index ETF 
MSCI Information Technology Index ETF is home to 303 technology stocks with an AUM of $9.3 billion. It follows the MSCI USA IMI Information Technology Index. Apple accounts for a 15.4% share in the basket. 
MSCI Information Technology Index ETF has an expense ratio of 0.08%, while volume is solid at 246,000 shares a day. 
iShares US Technology ETF 
iShares Dow Jones US Technology ETF tracks the Russell 1000 Technology RIC 22.5/45 Capped Index, giving investors exposure to 131 U.S. electronics, computer software and hardware, and informational technology companies. Apple makes up 15.3% of the assets. 
iShares Dow Jones US Technology ETF has an AUM of $15.7 billion and charges 40 bps in fees and expenses. Volume is good as it exchanges 931,000 shares a day. 
Vanguard Mega Cap Growth ETF 
Vanguard Mega Cap Growth ETF offers diversified exposure to the largest growth stocks in the U.S. market. It tracks the CRSP US Mega Cap Growth Index and holds 79 securities in its basket, with Apple accounting for 11.9% of the total assets. 
Vanguard Mega Cap Growth ETF charges 7 bps in annual fees and trades in a good volume of around 303,000 shares a day on average. The fund has an AUM of $18.4 billion.
<a href="https://www.zacks.com/stock/news/2266312/will-apple-beat-on-q2-earnings-amid-iphone-slump-etfs-in-focus?cid=CS-BENZ-FT-etf_news_and_commentary-2266312">To read this article on Zacks.com click here.</a>

There&#39;s no shortage of commentary and concern regarding the size of the S&amp;P 500&#39;s top several names and their influence on the broader market.
Throw in Netflix (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/nflx#NASDAQ">NFLX</a>) further down the list by market value and its clear the FAAMNG stocks are propping the domestic equity market up this year. Those names are Facebook (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/fb#NASDAQ">FB</a>), Apple (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/aapl#NASDAQ">AAPL</a>), Amazon (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/amzn#NASDAQ">AMZN</a>), Microsoft (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/msft#NASDAQ">MSFT</a>), Netflix and Google parent Alphabet (NASDAQ: <a class="ticker" href="https://www.benzinga.com/stock/goog#NASDAQ">GOOG</a>).
<h3>What To Know</h3>
Investors looking for broader exposure to the FAAMNG group can consider the Vanguard Mega Cap Growth ETF (NYSE: <a class="ticker" href="https://www.benzinga.com/stock/mgk#NYSE">MGK</a>), CFRA Research&#39;s focus ETF for <a href="https://www.benzinga.com/trading-ideas/long-ideas/20/05/15940978/4-sector-etfs-for-may-2-to-buy-2-to-avoid">the month of May.</a> The FAAMNG group accounts for six of MGK&#39;s top 10 holdings and that&#39;s good news because as <a href="https://www.cfraresearch.com/">CFRA Research </a>Director of ETF &amp; Mutual Fund Research Todd Rosenbluth points out, the research firm has Buy&nbsp;or Strong Buy&nbsp;ratings on nine of the Vanguard fund&#39;s top 10 holdings.
MGK&#39;s top 10 holdings combine for over 52% of the fund&#39;s roster.
&ldquo;While CFRA does not believe past performance is the sole reason to choose an ETF, we do consider short- and intermediate-term relative performance in our star ratings MGK was up 17% in the one-month period ended May 1 and up 11% in the past year,&rdquo; said Rosenbluth. &ldquo;This compares quite favorably to the S&amp;P 500 Index.&rdquo;
<h3>Why It&#39;s Important </h3>
As is the case with other growth ETFs, MGK is heavily allocated to the technology and consumer discretionary sectors. Those groups <a href="https://investor.vanguard.com/etf/profile/MGK">combine for 65%</a> of the fund&#39;s roster. Growth dominated value during the recently deceased bull market, but not much is changing on that front this year despite the March meltdown in equities.
Including Microsoft, CFRA is bullish on three of MGK&#39;s marquee components.
&ldquo;CFRA Equity Analyst John Freeman recently reiterated a Buy recommendation on MSFT and a 12-month target price of $197,&rdquo; said Rosenbluth. &ldquo;He viewed quarterly results as quite strong despite Covid-19&#39;s negative impact on discretionary spending and on the supply chain for Windows PCs and Surface products as MSFT warned in February. MSFT&#39;s quarterly revenue grew 15% and EPS rose by 23% in the past year and both beat consensus forecasts. Freeman.&rdquo;
<h3>What&#39;s Next </h3>
MGK is attractively priced at 0.07% per year, or $7 on a $10,000 investment. While the fund is trading slightly lower this year, Rosenbluth sees upside potential.
&ldquo;CFRA finds MGK to offer extremely high reward potential, as the fund earns a score of 99 out of 100, yet the fund is also relatively safe as evidenced by an above-average risk score of 67; in CFRA&#39;s scoring system, a higher risk score is better as it connotes lower risk,&rdquo; he said.

One of the primary reasons investors have embraced exchange-traded funds over the years is lower fees relative to actively managed equivalents. ETF issuers continue rewarding that faith with a &ldquo;race to the bottom&rdquo; outlook on ETF expenses.
Predictably, Vanguard plays a big role in the trend of lower ETF fees, and after a recent spate of fee cuts from rival issuers, the Pennsylvania-based fund giant is again making its low fee presence felt.
On Thursday, Vanguard, the second-largest U.S. ETF issuer, announced fee reductions on 35 mutual fund classes, including 11 ETFs. But before we get to that good news, there is some bad news ... sort of.
<h3>Fee Raise</h3>
Vanguard slightly raised the annual expense ratio on the Vanguard Health Care ETF (NYSE: <a class="ticker" href="/stock/vht#NYSE">VHT</a>) to 0.1 percent from 0.09 percent. Fidelity, one of Vanguard&#39;s chief competitors, offers the ETF industry&#39;s<a href="http://www.benzinga.com/trading-ideas/long-ideas/16/10/8556957/fidelity-has-a-say-in-etf-fee-tussle"> least expensive lineup</a> of sector ETFs.
<h3>Fee Cuts</h3>
The 11 ETF fee cuts unveiled by Vanguard include a significant portion of the issuer&#39;s fixed income lineup. All of the following saw annual fees reduced to 0.07 percent from 0.1 percent:
<ul>
<li>Vanguard Extended Duration Treasury ETF (NYSE: <a class="ticker" href="/stock/edv#NYSE">EDV</a>).</li>
<li>Vanguard Intermediate-Term Bond ETF (NYSE: <a class="ticker" href="/stock/biv#NYSE">BIV</a>).</li>
<li> Vanguard Intmdte Tm Govt Bd ETF (NASDAQ: <a class="ticker" href="/stock/vgit#NASDAQ">VGIT</a>).</li>
<li>Vanguard Long Term Corporate Bond ETF (NASDAQ: <a class="ticker" href="/stock/vclt#NASDAQ">VCLT</a>).</li>
<li>Vanguard Lg Term Govt Bd ETF (NASDAQ: <a class="ticker" href="/stock/vglt#NASDAQ">VGLT</a>).</li>
<li>Vanguard Mortgage Bkd Sects ETF (NASDAQ: <a class="ticker" href="/stock/vmbs#NASDAQ">VMBS</a>).</li>
<lI>and the Vanguard Short Term Corporate Bond ETF (NASDAQ: <a class="ticker" href="/stock/vcsh#NASDAQ">VCSH</a>).</li>
</ul>
Three of Vanguard&#39;s mega-cap equity ETFs now sport annual expense ratios <a href="https://pressroom.vanguard.com/nonindexed/Fact-sheet-first-wave-expense-ratio-changes-122216.pdf">of 0.07 percent</a>, down from 0.09 percent. Those ETFs are the Vanguard Mega Cap ETF (NYSE: <a class="ticker" href="/stock/mgc#NYSE">MGC</a>), Vanguard Mega Cap 300 Growth Index ETF (NYSE: <a class="ticker" href="/stock/mgk#NYSE">MGK</a>) and the Vanguard Mega Cap Value Index ETF (NYSE: <a class="ticker" href="/stock/mgv#NYSE">MGV</a>).
<h3>Fee Wars</h3>
&ldquo;In 2004, when Vanguard managed $6 billion in ETF assets, the average expense ratio for Vanguard&rsquo;s ETFs was 0.22 percent. Today, Vanguard manages $593 billion in U.S. ETF assets. The average expense ratio of the firm&rsquo;s ETFs is 0.12 percent, or less than one-third that of the 0.53 percent industry average,&rdquo; said Vanguard<a href="https://pressroom.vanguard.com/news/Press-release-VG-announces-first-wave-expense-ratio-changes-12-22-16.html"> in a statement</a>.
Vanguard&#39;s latest fee cuts answer <a href="https://www.benzinga.com/trading-ideas/long-ideas/16/12/8824318/blackrock-fee-cuts-extend-into-smart-beta-realm">two such moves </a>this year, including one this month, by rival BlackRock, Inc. (NYSE: <a class="ticker" href="/stock/blk#NYSE">BLK</a>) and one fee reduction announcement by Charles Schwab Corp (NYSE: <a class="ticker" href="/stock/schw#NYSE">SCHW</a>).

One of the primary reasons advisors and investor love Vanguard exchange traded funds are the low fees. Pennsylvania-based Vanguard, the third-largest U.S. ETF issuer, has some of the lowest fees in the ETF business, and the company has consistently shown during its time in the ETF industry that as its funds swell in size, it will pare annual expense ratios.

	&nbsp;

	Forgive the Christmas comparison, but Santa arrived a few days early for Vanguard investors this year as the company said Tuesday it is lowering fees on 21 of its ETFs. That includes Vanguard&#39;s group of 10 sector ETFs. With the new, lower fees, Vanguard undercuts rival Fidelity as having the least expensive sector ETFs on the market today.

	&nbsp;

	Previously, Vanguard sector ETFs charged 0.12 percent a year, or $12 per $10,000 on its sector ETFs. Now, the Vanguard Health Care ETF (NYSE: <a class="ticker" href="/stock/vht#NYSE">VHT</a>) sports an annual fee of just 0.09 percent while other popular Vanguard sector offerings, such as the Vanguard Information Technology ETF (NYSE: <a class="ticker" href="/stock/vgt#NYSE">VGT</a>) and the Vanguard Consumer Staples ETF (NYSE: <a class="ticker" href="/stock/vdc#NYSE">VDC</a>), will charge 0.1 percent per year. VGT is known for having <a href="http://www.benzinga.com/trading-ideas/long-ideas/15/10/5941514/with-one-exception-apple-etfs-calm-ahead-of-earnings">one of the largest weights</a> to Apple Inc. (NASDAQ: <a class="ticker" href="/stock/aapl#NASDAQ">AAPL</a>) among all ETFs.&nbsp;

	&nbsp;

	&ldquo;Vanguard continues to set the standard as the industry&rsquo;s low-cost leader, reducing costs not just on a subset of products, but across our funds and ETFs,&rdquo; said Vanguard CEO Bill McNabb <a href="https://pressroom.vanguard.com/content/press_release/Press_Release_Vanguard_Reports_Lower_Expense_Ratios_53_Funds_ETFs_122215.html">in a statement</a>. &ldquo;We have a track record of nearly 40 years of lowering the cost of investing for our clients and we have every intention of continuing to lower the cost of investing.&rdquo;&nbsp;

	&nbsp;

	Eight fixed income ETFs issued by Vanguard also saw annual fees reduced by 17 percent to 0.1 percent from 0.12 percent. The group includes the Vanguard Long-Term Corporate Bond ETF (NASDAQ: <a class="ticker" href="/stock/vclt#NASDAQ">VCLT</a>), Vanguard Long-Term Government Bond ETF (NASDAQ: <a class="ticker" href="/stock/vglt#NASDAQ">VGLT</a>), Vanguard Mortgage-Backed Securities Index ETF (NASDAQ: <a class="ticker" href="/stock/vmbs#NASDAQ">VMBS</a>) and the Vanguard Intermediate-Term Bond ETF (NYSE: <a class="ticker" href="/stock/biv#NYSE">BIV</a>).

	&nbsp;

	Vanguard also announced lower fees on its mega-cap style ETFs. The Vanguard Mega Cap ETF (NYSE: <a class="ticker" href="/stock/mgc#NYSE">MGC</a>) and the Vanguard Mega Cap Value ETF (NYSE: <a class="ticker" href="/stock/mgv#NYSE">MGV</a>) now charge 0.06 percent per year, down from 0.08 percent, while the Vanguard Mega Cap Growth ETF (NYSE: <a class="ticker" href="/stock/mgk#NYSE">MGK</a>) is charging 0.08 percent, down from 0.1 percent.

Intraday Update

Vanguard Is At It Again; Lowers Fees On 21 ETFs

<div class="entry-content">

		The large-cap growth style ranks the best out of the twelve fund styles as detailed in my <a href="http://blog.newconstructs.com/2012/07/16/roadmap-to-the-best-worst-etf-mutual-fund-styles/">style roadmap</a>. It gets my Neutral rating, which is based on aggregation of ratings of 26 ETFs and 724 mutual funds in the large-cap growth style as of July 16, 2012. Reports on the best &amp; worst ETFs and mutual funds in every sector and style are <a href="http://www.newconstructs.com/nc/research/report/etf-and-fund-reports.htm">here</a>.

		Figures 1 and 2 show the five best and worst-rated ETFs and mutual funds in the style. Not all large-cap growth style ETFs and mutual funds are created the same. The number of holdings varies widely (from 12 &nbsp;to 589), which creates drastically different investment implications and ratings. The best ETFs and mutual funds allocate more value to Attractive-or-better-rated stocks than the worst, which allocate too much value to Neutral-or-worse-rated stocks.

		To <a href="http://blog.newconstructs.com/2012/04/03/how-to-find-the-best-etfs/">identify the best</a> and <a href="http://blog.newconstructs.com/2012/04/05/how-to-avoid-the-worst-etfs/">avoid the worst</a> ETFs and mutual funds within the large-cap growth style, investors need a <a href="http://blog.newconstructs.com/2011/11/23/predictive-fund-rating-methodology/">predictive rating</a> based on (1) <a href="http://blog.newconstructs.com/2011/11/22/portfolio-management-rating-methodology/">stocks ratings</a> of the holdings and (2) the <a href="http://blog.newconstructs.com/2011/10/28/total-annual-costs-methodology/">all-in expenses</a> of each ETF and mutual fund. Investors need not rely on backward-looking ratings. My fund rating methodology is detailed <a href="http://blog.newconstructs.com/2011/11/23/predictive-fund-rating-methodology/">here</a>.

		Investors seeking exposure to the large-cap growth style should buy one of the Attractive-or-better rated ETFs or mutual funds from Figures 1 and 2.

		See ratings and reports on all ETFs and mutual funds in this style on my free <a href="http://www.newconstructs.com/nc/fundscreener/fund-screener.htm?task=ACTION_CATEGORY_TYPE_SEARCH&amp;selectedTypes=0,1&amp;selectedCategoryIds=5d8f358c114e11e1a32f00188b533b34">mutual fund and ETF screener</a>.
<div>

			Figure 1: ETFs with the Best &amp; Worst Ratings &ndash; Top 5
</div>

		<a href="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth1.jpg"><img alt="" class="aligncenter size-full wp-image-4276" height="235" src="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth1.jpg" title="LargeCapGrowth1" width="329" /></a>

		* Best ETFs exclude ETFs with less NAV&rsquo;s less than 100 million.
<div>

			Sources: New Constructs, LLC and company filings
</div>

		Vanguard S&amp;P 500 Growth ETF (NYSE: VOOG) is excluded from Figure 1 because its total net assets (TNA) are below $100 million and do not meet our liquidity standards.
<div>

			Figure 2: Mutual Funds with the Best &amp; Worst Ratings &ndash; Top 5
</div>

		<a href="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth2.jpg"><img alt="" class="aligncenter size-full wp-image-4275" height="235" src="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth2.jpg" title="LargeCapGrowth2" width="329" /></a>

		* Best mutual funds exclude funds with NAV&rsquo;s less than 100 million.
<div>

			Sources: New Constructs, LLC and company filings
</div>

		Virtus Insigh Funds Trust: Virtus Core Equity Funds (NYSE: HGRIX) and (NYSE: PICCX) are excluded from Figure 2 because their total net assets (TNA) are below $100 million and do not meet our liquidity standards.

		Vanguard Mega Cap 300 Growth (NYSE: <a class="ticker" href="/stock/mgk#NYSE">MGK</a>) is my top-rated large-cap growth ETF and FundVantage Trust: Polen Growth Fund (NYSE: POLIX) is my top-rated large-cap growth mutual fund. Both earn my ATTRACTIVE rating.

		First Trust Large Cap Growth AlphaDEX Fund (NYSE: <a class="ticker" href="/stock/ftc#NYSE">FTC</a>) is my worst-rated large-cap growth ETF and Ivy Funds: Ivy Tax-Managed Equity Fund (NYSE: <a class="ticker" href="/stock/iyeax#NYSE">IYEAX</a>) is my worst-rated large-cap growth mutual fund. Both earn a Neutral-or-worse rating.

		Per figure 3, Investors are demonstrating their ability to identify investment worthy ETFs. 61% of the capital allocated to large-cap growth ETFs is allocated to Attractive-or-better-rated ETFs. The same cannot be said for mutual funds investors since less than 1% of the capital allocated to mutual funds is allocated to investment worthy mutual funds.

		The takeaway is: mutual fund managers allocate too much capital to low-quality stocks and investors are unable to identify investment worthy mutual funds.
<div>

			Figure 3: Large-cap Growth Style Landscape For ETFs, Mutual Funds &amp; Stocks
</div>
<div>

			<a href="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth3.jpg"><img alt="" class="aligncenter size-full wp-image-4274" height="137" src="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth3.jpg" title="LargeCapGrowth3" width="410" /></a>

			Sources: New Constructs, LLC and company filings
</div>

		As detailed in &ldquo;<a href="http://blog.newconstructs.com/2012/05/09/low-cost-funds-dupe-investors/">Cheap Funds Dupe Investors</a>&rdquo;, the fund industry offers many cheap funds but very few funds with high-quality stocks, or with what I call good <a href="http://blog.newconstructs.com/2011/11/22/portfolio-management-rating-methodology/">portfolio management</a>.

		Investors need to tread carefully when considering large-cap growth ETFs and mutual funds. Only 7 ETFs and 30 mutual funds in the large-cap growth style allocate enough value to Attractive-or-better-rated stocks to earn an Attractive rating.

		QUALCOMM Inc. (NASDAQ: <a class="ticker" href="/stock/qcom#NASDAQ">QCOM</a>) is one of my favorite stocks held by large-cap growth ETFs and mutual funds and earns my Attractive rating. QCOM&rsquo;s management has proven to be effective stewards of capital by generating a return on invested capital (<a href="http://www.newconstructs.com/nc/help/glossary.htm#roicDef">ROIC</a>) of 35% in fiscal year end 2011. This places the company in the 96th percentile of all Russell 3000 companies. In spite of strong past performance, the market is setting a low hurdle for QCOM&rsquo;s future performance. To justify its current stock price (~$54.98), QCOM has to increase its after-tax profits (<a href="http://www.newconstructs.com/nc/help/glossary.htm#nopat">NOPAT</a>) by 18.3% for only one year. This is a low hurdle given that QCOM&rsquo;s average profit growth over the past 14 years has been 52%. QCOM is positioned to beat market expectations.

		Hyatt Hotels Corp (NYSE: <a class="ticker" href="/stock/h#NYSE">H</a>) is one of my least favorite stocks held by large-cap growth ETFs and mutual funds and earns my Dangerous rating. Hyatt is a value destroyer. The company has failed to earn an <a href="http://www.newconstructs.com/nc/help/glossary.htm#roicDef">ROIC</a> over its <a href="http://www.newconstructs.com/nc/help/glossary.htm#helpWacc">WACC</a> in each of the three years I&rsquo;ve covered the company, which has resulted in negative <a href="http://www.newconstructs.com/nc/help/glossary.htm#epDef">economic earnings</a>. At fiscal year end 2011, Hyatt&rsquo;s economic earnings where an astounding negative $320 million. This places Hyatt in the bottom 7th percentile of all Russell 3000 companies. To make matters worse, to justify its current stock price (~$34.54), the company must grow profits by 9.8% compounded annually for 36 years. Poor past performance coupled with a high performance hurdle make Hyatt a poor risk/reward tradeoff.

		Figures 4 and 5 show the rating landscape of all large-cap growth ETFs and mutual funds.

		Our <a href="http://blog.newconstructs.com/2012/07/16/roadmap-to-the-best-worst-etf-mutual-fund-styles/">style roadmap</a> report ranks all styles and highlights those that offer the best investments.
<div>

			Figure 4: Separating the Best ETFs From the Worst Funds
</div>
<div>

			<a href="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth4.jpg"><img alt="" class="aligncenter size-full wp-image-4273" height="245" src="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth4.jpg" title="LargeCapGrowth4" width="409" /></a>

			Sources: New Constructs, LLC and company filings
</div>
<div>

			Figure 5: Separating the Best Mutual Funds From the Worst Funds
</div>
<div>

			<a href="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth5.jpg"><img alt="" class="aligncenter size-full wp-image-4272" height="245" src="http://blog.newconstructs.com/wp-content/uploads/2012/07/LargeCapGrowth5.jpg" title="LargeCapGrowth5" width="409" /></a>

			Sources: New Constructs, LLC and company filings
</div>

		Review my <a href="http://www.newconstructs.com/nc/fundscreener/fund-screener.htm?task=ACTION_CATEGORY_TYPE_SEARCH&amp;selectedTypes=0,1&amp;selectedCategoryIds=5d8f358c114e11e1a32f00188b533b34">full list</a> of ratings and rankings along with free reports on all 26 ETFs and 724 mutual funds in the large-cap growth style.

		Disclosure:&nbsp; I receive no compensation to write about any specific stock, sector, style or&nbsp;theme.
</div>

First Trust Large Cap Growth Opportunities AlphaDEX Fund

IYEAX

QCOM

Best & Worst ETFs and Mutual Funds: Large-cap Growth Style

When a stock trades up to $600, that's impressive. Problem is when we're talking about Apple (Nasdaq: <a class="ticker" href="/stock/aapl#Nasdaq">AAPL</a>), and that's exactly what we're doing here, it's also depressing. Depressing because a lot of investors want to get in on the action, but at $600, 100 shares costs $60,000. That's an entire portfolio for some investors.

One option for relief from this quandary comes from ETFs, scores of which <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/03/2428879/apple-and-etfs-questions-and-answers">offer decent exposure to Apple</a>. 

Fortunately, there are no "Apple ETFs" trading for $600. In fact, none of the ETFs that can be used for decent Apple exposure even trade in the triple digits. At least not yet. Here are some more "Apple on the cheap" ETF options to consider beyond the PowerShares QQQ (Nasdaq: <a class="ticker" href="/stock/qqq#Nasdaq">QQQ</a>), the Technology Select Sector SPDR (NYSE: <a class="ticker" href="/stock/xlk#NYSE">XLK</a>) and the iShares Dow Jones US Technology Index Fund (NYSE: <a class="ticker" href="/stock/iyw#NYSE">IYW</a>).

Global X NASDAQ 500 ETF (Nasdaq: QQQV)
The Global X NASDAQ 500 ETF debuted in December 2011, so it's still fair to call this fund a new ETF and it might be that rookie status that has folks glossing over this fund as a legitimate way of getting solid exposure to Apple. That's too bad because since QQQV debuted, it's up 17.4% and that's not including today's gains. That performance is triple what QQQ has offered over the same time frame.

What's interesting about QQQV as it pertains to Apple is that the ETF's exposure to the tech juggernaut is increasing. In mid-February <a href="http://www.benzinga.com/trading-ideas/long-ideas/12/02/2343618/not-the-usual-suspects-other-etfs-benefiting-from-apples-run-">Apple accounted for less than 13%</a> of QQQV's weight. As of March 23, Apple accounted for 14.4% of QQQV's weight.

iShares S&amp;P Global Technology Index Fund (NYSE: <a class="ticker" href="/stock/ixn#NYSE">IXN</a>)
The iShares S&amp;P Global Technology Index Fund can be slightly overlooked in the Apple ETF conversation, at least comparison to funds such as QQQ and XLK. That said, with over $647 million in assets under management, IXN is by no means a small ETF and given that the fund is up about 20% year-to-date, it's by no means a slack performer.

As of March 23, Apple accounted for 16.57% of IXN's weight, meaning investors get a decent slice of Apple pie for less than $71. Factor in Qualcomm (Nasdaq: <a class="ticker" href="/stock/qcom#Nasdaq">QCOM</a>) and a couple of other IXN constituents that make components for Apple products and the ETF's Apple exposure jumps to over 20%.

PowerShares Dynamic Semiconductors Portfolio (NYSE: <a class="ticker" href="/stock/psi#NYSE">PSI</a>)
No, the PowerShares Dynamic Semiconductors Portfolio does NOT feature any direct Apple exposure. And yes, the ETF is thinly traded. PSI's utility is derived from what semiconductor names it does offer allocations to. Translation: Qualcomm and Broadcom (Nasdaq: <a class="ticker" href="/stock/brcm#Nasdaq">BRCM</a>) account for over 10% of this fund's weight and that likely explains why PSI is up more than 15% year-to-date. PSI is a decent backdoor avenue to Apple, especially for less than $17.

Vanguard Mega Cap 300 Growth Index ETF (NYSE: <a class="ticker" href="/stock/mgk#NYSE">MGK</a>)
As is the case with QQQV, Apple's weight within the Vanguard Mega Cap 300 Growth Index ETF has been on the rise thanks to the stock's ever-increasing market cap. At the end of the fourth quarter, MGK's allocation to Apple was 7.4%. By the start of March, that weight had jumped to 9%. Home to 176 stocks, MGK is probably the most conservative fund on this list and it's certainly cost-effective with an expense ratio of just 0.12%.

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The mega-cap tech stocks, Apple (AAPL), Amazon (AMZN), Microsoft (MSFT), Meta Platforms (META), Alphabet (GOOGL), Tesla (TSLA), and Nvidia (NVDA), ...

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<a href="https://investorplace.com">InvestorPlace - Stock Market News, Stock Advice &amp; Trading Tips</a>
It might be hard to believe there are exchange-traded funds (ETF) better than the Magnificent 7, which are up nearly <a href="https://www.bloomberg.com/quote/BM7T:IND">14%</a> year-to-date. However, some top-notch ETFs consistently beat the S&amp;P 500 over the long haul while providing more growth opportunities. 



Moreover, the S&amp;P 500&rsquo;s present composition lacks diversification due to a heavy slant toward the Magnificient 7. Today, those seven stocks account for <a href="https://www.barrons.com/articles/stock-market-funds-magnificent-seven-tesla-nvidia-apple-aa1c7d83">30%</a> of the index, meaning the remaining 495 tickers do little for performance on the upside while holding it back on the downside.&nbsp;



Which ETFs are better for diversification than the S&amp;P 500? One suggestion would be equal-weighted funds, where the holdings are reset every quarter, with every holding starting the quarter with the same weight. 



Here are three ETFs to help hedge against a lack of diversity in the major indexes.



<h2>Pacer US Cash Cows 100 ETF (COWZ)</h2>



<div><img width="300" height="169" src="https://investorplace.com/wp-content/uploads/2020/11/cash-cow-1600-300x169.jpg" alt="cow made out of cash in green field with bright blue sky behind it"><div>Source: Reel2Reel/shutterstock.com</div></div>One of the more attractive ETFs on the market is Pacer US Cash Cows 100 ETF (BATS:<a href="https://investorplace.com/stock-quotes/cowz-stock-quote/">COWZ</a>). The fund represents a quality passive investment built from companies with strong free cash flow. For me, this metric constitutes the most critical attribute of a healthy company.&nbsp;As such, over the past five years, COWZ has generated a cumulative return of 86.72%, 1,092 basis points higher than the S&amp;P 500.&nbsp;



To achieve this, the index starts with all the companies from the Russell 1000 Index. Those companies&rsquo; average free cash flow yield is 3.15%, with a 24.67 price-to-earnings ratio. It then selects the <a href="https://www.paceretfs.com/products/cowz/">top 100</a> free cash flow yields from the trailing 12 months. These companies have a free cash flow yield of 8.33% with an 11.14x P/E.&nbsp;



Finally, it weights those 100 stocks based on their free cash flow, which ensures larger, more stable companies get higher weightings. Each stock can account for no more than 2% of the index.&nbsp;As such, investors should keep a close eye on ETFs better than the Magnificent 7 stocks like COWZ.



It&rsquo;s a winning process.



<h2>Vanguard Mega Cap Growth ETF (MGK)</h2>



<div><img width="300" height="169" src="https://investorplace.com/wp-content/uploads/2019/07/etfs1600july2019-300x169.jpg" alt='ETFs: A stock market ticker tape that reads "ETFs." representing international etfs'><div>Source: Shutterstock</div></div>Vanguard Mega-Cap Growth ETF (NYSEARCA:<a href="https://investorplace.com/stock-quotes/mgk-stock-quote/">MGK</a>) has outperformed most ETFs over the past five years, including COWZ. It&rsquo;s up more than 121%, making it look quite attractive.&nbsp;Furthermore, if you consider stock performance over the past five years, large-caps have <a href="https://www.institutionalinvestor.com/article/2cp4j21gvznse73f16ry8/portfolio/are-small-caps-at-the-tail-end-of-their-historic-underperformance-cycle">outperformed small-caps</a>, so the returns achieved by MGK make sense.&nbsp;&nbsp;




&ldquo;According to Morningstar, the Russell 2000 has risen an annualized 25.2 percent during periods of increasing growth and slowing inflation since the 1970s, outpacing the S&amp;P&rsquo;s 17.3 percent annualized gain in such environments,&rdquo; <a href="https://www.institutionalinvestor.com/article/2cp4j21gvznse73f16ry8/portfolio/are-small-caps-at-the-tail-end-of-their-historic-underperformance-cycle">stated</a> Institutional Investor in January.&nbsp;&nbsp;




MGK <a href="https://personal1.vanguard.com/pub/Pdf/sp3138.pdf?2210204704">tracks the performance</a> of the CRSP US Mega Cap Growth Index, a collection of 82 stocks with a median market capitalization of <a href="https://investor.vanguard.com/investment-products/etfs/profile/mgk#fund-literature">$1.3 trillion</a>. Because it&rsquo;s focused on growth stocks, the average holding has a P/E of 38.3x and a price-to-book of 10.8.



Technology represents the largest weighting at 58.70%, with consumer discretionary (21.20%) and industrials (7.30%) among the top three sectors.&nbsp;&nbsp;At a 0.07% expense ratio, it&rsquo;s a low-cost fund to buy for the long haul.&nbsp;



<h2>SPDR Portfolio S&amp;P 500 Value ETF (SPYV)&nbsp;&nbsp;&nbsp;&nbsp;</h2>



<div><img width="300" height="169" src="https://investorplace.com/wp-content/uploads/2022/03/sp500_1600-300x169.png" alt="The Standard &amp; Poor's 500 is an American stock market index based on the market capitalizations of 500 large companies having common stock listed on the NYSE or NASDAQ. 3D Illustration."><div>Source: Pavel Ignatov / Shutterstock.com</div></div>SPDR Portfolio S&amp;P 500 Value ETF (NYSEARCA:<a href="https://investorplace.com/stock-quotes/spyv-stock-quote/">SPYV</a>) is a nice fund to own to complement the growth of MGK. Yet, it can be hard to tell the difference between the two strategies.&nbsp;



SPYV<a href="https://www.ssga.com/us/en/individual/etfs/funds/spdr-portfolio-sp-500-value-etf-spyv"> tracks the performance</a> of the S&amp;P 500 Value Index, a collection of 442 stocks from the S&amp;P 500 exhibiting value characteristics such as low P/Es, P/Bs, and price-to-sales.&nbsp;However, it exhibits the lowest performance of the three ETFs mentioned in this article. That makes sense, given value stocks have been <a href="https://www.barrons.com/articles/value-growth-stocks-winning-funds-fdb7e1de">out of fashion</a> for over a decade.&nbsp;&nbsp;



Despite this, the fund&rsquo;s low fees (0.04%) have attracted nearly $21 billion in net assets, which could suggest a value stock comeback.&nbsp;The fund&rsquo;s top three sectors by weight are financials (22.60%), health care (18.17%), and industrials (11.56%). Berkshire Hathaway (NYSE:<a href="https://investorplace.com/stock-quotes/brk.b-stock-quote/">BRK-B</a>) is the top holding at 3.81%. It also helps that&nbsp;Morningstar gives it a <a href="https://www.morningstar.com/etfs/arcx/spyv/quote">five-star rating</a>.&nbsp;



On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com<a href="https://investorplace.com/corporate/investorplace-publishing-guidelines/"> Publishing Guidelines</a>.<a href="https://investorplace.com/cryptocurrency//"></a>
<div>Will Ashworth has written about investments full-time since 2008. Publications where he&rsquo;s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.</div><h3>More From InvestorPlace</h3>
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The post <a href="https://investorplace.com/2024/04/the-magnificent-7-stocks-are-hot-but-these-3-etfs-could-be-hotter/">The Magnificent 7 Stocks Are Hot, but These 3 ETFs Could Be Hotter</a> appeared first on <a href="https://investorplace.com">InvestorPlace</a>.

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Latest News for Vanguard Mega Cap Growth ETF (ARCA:MGK)

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