A Momentum Play on the Technology Sector

The Invesco DWA Technology Momentum ETF (PTF) provides an alternate take on U.S. technology firms.

PTF is unique because it selects and weights stocks by price momentum with a goal of outperforming the broad market. More specifically, PTF tracks the Nasdaq U.S. Benchmark Index that is composed of at least 30 common stocks of companies in the technology sector.

These stocks are selected based on a variety of investment merit criteria, including fundamental growth, stock valuation, investments and risk factors. Securities evaluated with the greatest capital appreciation potential are selected.

However, sometimes the fund’s focus on capturing pricing momentum can cause its holdings exposure to become skewed, with major sector bets and sizable allocations outside the traditional tech field.

A relatively high expense ratio of 0.60% and a somewhat weak daily trading volume have turned away some traders from PTF. However, experienced traders who pay attention to the fund’s spreads can still trade it effectively.

The growing U.S. economy and strong expansion in the technology sector have helped to fuel PTF. So far this year, the fund has returned an impressive 14.31%, handily beating the S&P 500’s year to date return of 7.24%. PTF’s one-year’s return is 22.66%.

PTF’s share price rose from the $60 level to the $63-$64 level and neared its 52-week high following Apple’s strong second-quarter earnings report on July 31. On Aug. 16, PTF saw a small pullback after NVDA offered guidance that was weaker than anticipated in its quarterly report. PTF has held around the low $63 mark since then. Interested investors could consider using this pullback as a potential entry point.

Chart courtesy of Stockcharts.com

PTF’s top holdings are Apple (AAPL), 7.46%; Amphenol (APH), 6.48%; NVIDIA (NVDA), 5.57%; Paycom Software (PAYC), 4.74%; and Square (SQ), 3.91%.

Investors interested in a momentum play in the technology sphere can look to Invesco DWA Technology Momentum ETF (PTF) as a potential candidate.

Jim Woods

Jim Woods is a 20-plus-year veteran of the markets with varied experience as a broker, hedge fund trader, financial writer, author and newsletter editor. Jim is the editor of Intelligence Report, Investing Edge, the Bullseye Stock Trader, and The Deep Woods (formerly the Weekly ETF Report). His books include co-authoring, “Billion Dollar Green: Profit from the Eco Revolution,” and “The Wealth Shield: How to Invest and Protect Your Money from Another Stock Market Crash, Financial Crisis or Global Economic Collapse.” He’s also ghostwritten many books and articles, as well as edited content for some of the investment industry’s biggest luminaries. His articles have appeared on many leading financial websites, including StockInvestor.com, InvestorPlace.com, Main Street Investor, MarketWatch, Street Authority, Human Events and many others. Jim formerly worked with Investor’s Business Daily founder William J. O’Neil, helping to author training courses in the CANSLIM stock-picking methodology. The independent firm TipRanks rates Jim the No. 3 financial blogger in the world (out of more than 6,000). TipRanks calculates that, since 2012, he's made 361 successful recommendations out of 499 total, earning a success rate of 72% and a +15.3% average return per recommendation. He is known in professional and personal circles as “The Renaissance Man,” because his expertise includes such varied fields as composing and performing music; Western horsemanship, combat marksmanship, martial arts, auto racing and bodybuilding. Jim holds a BA in philosophy from the University of California, Los Angeles, and is a former U.S. Army paratrooper. A self-described “radical for capitalism,” he celebrates the virtue of making money from his Southern California horse ranch.