Tapping Into an ‘Internet Trust’ ETF

Not too long ago, I wrote about investors shifting from growth and technology stocks to value stocks.

At the time, the national sentiment was that the lockdown and COVID-19 pandemic would soon abate, and then things would return to normal. Now, it appears that those thoughts were premature.

With the effects of the Delta variant of COVID-19 still raging and Fed Chairman Jerome Powell possibly thinking about announcing that the Fed plans to curb its quantitative easing (QE) program at the next Federal Open Market Committee (FOMC) meeting, the defensive and technology stocks are the ones that are pushing the market higher.

One of my favorite technology-based exchange-traded funds (ETFs) is one that my Successful Investing readers will find familiar, as it has been a mainstay in our Aggressive Portfolio since June 2020: the First Trust Dow Jones Internet Index Fund (NYSEARCA: FDN).

The stocks in this ETF’s portfolio are selected from a list of companies that obtain more than 50% of their revenue from the internet. Then, stocks that meet the criteria are ranked by their three-month average float-adjusted market capitalization and by their three-month average share volume. Finally, stocks are ranked again, based on the average of the company’s market capitalization and volume ranking. Only the 15 highest-ranked stocks in the Internet Commerce subfield and the 25 highest-ranked stocks from the Internet Services subfield are included in the portfolio.

Currently, the fund’s top holdings include Amazon.com, Inc. (NASDAQ: AMZN), Facebook, Inc. (NASDAQ: FB), Alphabet Inc. Class A (NASDAQ: GOOGL), Alphabet Inc. Class C (NASDAQ: GOOG), PayPal Holdings Inc. (NASDAQ: PYPL), Salesforce.com, Inc. (NYSE: CRM), Netflix, Inc. (NASDAQ: NFLX) and Cisco Systems, Inc. (NASDAQ: CSCO).

This fund’s performance has been relatively strong, even when including the damage done by the COVID-19 pandemic. As of Aug. 24, FDN has been down 2.81% over the past month and up 9.23% for the past three months. It is currently up 15.13% year to date.

Chart courtesy of www.stockcharts.com

The fund has amassed $10.49 billion in assets under management and has an expense ratio of 0.51%.

While FDN does provide an investor with a way to profit from technology, this kind of ETF may not be appropriate for all portfolios. Thus, interested investors always should conduct their due diligence and decide whether the fund is suitable for their investing goals.

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.