Market Overview

Almost Apple: Other ETFs Impacted By Just One Stock


The impact of Apple's (Nasdaq: AAPL) rising market value on the broader market and on numerous ETFs has been well documented, but the iPad and iPhone maker is by no means the only stock to account for a dangerously high percentage of some ETFs.

Apple accounted for just 4.68% of the SPDR S&P 500 (NYSE: SPY) as of April 5. That's less than a quarter of the stock's weighting in the Technology Select Sector SPDR (NYSE: XLK) and the PowerShares QQQ (Nasdaq: QQQ) and that's less than a fifth of the stock's weighting in the iShares Dow Jones U.S. Technology Sector Index Fund (NYSE: IYW).

Interestingly enough, Apple accounted for just 4.6% of the S&P 500 as of April 5 and that's nowhere near the large weightings given to other stocks around the world. That also means there are plenty of ETFs that are vulnerable to a similar situation as is found with IYW or XLK: An excessive weight to one stock is great when that stock is cooperating to the upside, but it's not so good when that stock is falling.

Here are a few examples of ETF's that could be vulnerable to one-stock shock syndrome.

iShares MSCI Switzerland Index Fund (NYSE: EWL) This might be the fund that's least concerning on the list because Nestle (PK: NSRGY) is the stock that EWL has an excessive weight to. The world's largest food company accounts for almost 23% of the fund's weight, but in a market environment that looks like it's about to turn the light out on risky fare and embrace staples again, EWL's big concentration to Nestle could work in the ETF's favor in the near-term.

iShares MSCI South Korea Index Fund (NYSE: EWY) The iShares MSCI South Korea Index Fund indeed features a large allocation to one stock and even though it's not Apple, Apple could impact that stock. Samsung, arguably the most legitimate challenger to Apple, represents 22.69% of EWY's weight. That's more than triple Hyundai, EWY's second-largest holding.

On the other hand, if Apple starts to slip and lose smartphone and tablet market share to Samsung, then EWY becomes a compelling way of hedging long Apple positions. For those keeping score at home, Samsung accounts for "just" 16% of South Korea's Kospi Index.

Market Vectors Retail ETF (NYSE: RTH) Given how many stocks sport the retail label in the U.S., a considerable amount of RTH's weight is tied up in just a small number of stocks. The top-10 holdings represent nearly two-thirds of RTH's weight and the fund is home to just 26 stocks. Wal-Mart (NYSE: WMT), the world's largest retailer, accounts for 12% of RTH's weight, but as is the case with EWL and Nestle, that might not be a bad thing in a risk-off environment. Plus, at least one analyst is bullish on RTH.

Global X FTSE Colombia 20 ETF (NYSE: GXG) There's no denying the Global X FTSE Colombia 20 ETF has been having a stellar year and that it's one of the best performing Latin America ETFs as well. A large part of GXG's run has been fueled by the Apple-esque rise of Ecopetrol (NYSE: EC), Colombia's state-run oil company. Ecopetrol has been one the best oil stocks to own since late 2011 and that benefits GXG, which has an almost 16% allocation to the oil giant. That also makes GXG vulnerable to any deep pullback in the shares of Colombia's largest company by market value.

Posted-In: Long Ideas News Sector ETFs Short Ideas Specialty ETFs Emerging Market ETFs Futures Commodities Best of Benzinga


Related Articles (AAPL + EC)

View Comments and Join the Discussion!

KSL Boosts Offer for Great Wolf

Voter Fraud: The Case for Voter ID