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Small Can Work With Tech ETFs

by
September 27, 2016 2:42 pm
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When it comes to exchange-traded funds tracking the technology sector, the largest sector weight in the S&P 500, the funds that command the most attention are large-cap products heavy on familiar stocks such as Apple Inc. (NASDAQ: AAPL) and Microsoft Corporation (NASDAQ: MSFT).

However, as is the case with broader small-cap funds, a small-cap technology ETF can help risk-tolerant investors bolster returns. That is what the PowerShares S&P SmlCp Inftn Thgy Pfo (NASDAQ: PSCT) is doing this year. PSCT is seen as the small-cap answer to the popular Technology SPDR (ETF) (NYSE: XLK).

Great Things Come In Little Packages

The PowerShares offering is not a fresh face. Now more than six years old, PSCT has a more than adequate track record investors can use to assess the fund. Additionally, this is not a flash in the pan ETF. PSCT, which holds nearly 100 stocks, is home to nearly $481 million in assets under management.

Related Link: Evaluating A Pair Of Multi-Factor ETfs

PSCT is up more than 20 percent year compared to a gain of 11.8 percent for XLK and some analysts believe small-cap tech names are poised to keep that out-performance going. As Benzinga reported at the end of August, Turning Point argued small-cap tech stocks are well-positioned to continue to outperform the rest of the tech sector.

So far this year, the Russell 2000 TECH Index is up 13 percent, more than double the 6 percent gain of the S&P 500. Since crude oil bottomed on February 11, the Russell 2000 TECH is up 38 percent, while the NDX, TPA BIGTECH, Russell 200 and Russell 1000 TECH indices are up 20, 28, 29 and 24 percent, respectively.

Young, But Effective

Since coming to market, PSCT has topped the S&P SmallCap 600 Index by nearly 200 basis points, according to PowerShares data

PSCT tracks the S&P SmallCap 600 Capped Information Technology Index, which holds companies “engaged in the business of providing information technology-related products and services, including computer hardware and software, Internet, electronics and semiconductors and communication technologies,” according to PowerShares.

Nearly 28 percent of PSCT's lineup is allocated to electronic equipment and components makers with another 20.8 percent devoted to software companies. Semiconductor and IT services providers combine for over 29 percent of the ETF's weight.

PSCT has added nearly $56 million in new assets over the past month, a healthy percentage of its current assets under management tally and a total exceeded by just four other PowerShares ETFs.

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