Opinions
Vikash Jain, CFA
Vanguard Information Technology ETF
VGT-N
BUY
Jul 23, 2012
Vanguard products are really solid and their fees are miniscule. If you are looking to add info tech to your portfolio, keep it to a minimum. Fairly well diversified. Mainly US exposure. Loss of liquidity.
$67.590
Stock price when the opinion was issued
E.T.F.'s
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HOLD
This is riding a monster trend and now you need to focus on managing your potential downside. Technology is non-mean reverting sector which is great, but the price is at very high valuations now. You may consider setting stops, but would continue to hold. Remember this sector dropped 90% on a sell off back in 2000.
E.T.F.'s
DON'T BUY
He likes the tech space which has runway to grow. It holds Apple, but it doesn't own FB anymore, but it owns Visa and Mastercard. He'd rather buy the individual names than the ETF. That said, don't overweight this space--people have been piling in and the trade is getting crowded. As for Apple, guidance for phone sales forward will be weaker, so that's a caveat. Depends on 60% of revenues on the iPhone, too.
E.T.F.'s
HOLD
VGT vs. RYT. RYT is a basket of tech companies, all under equal weight, costing 40 basis points. Compare it to Vanguard VGT, at only 10 basis points, which has the big boys like Apple, Microsoft, Visa, Mastercard, Cisco. Later in the cycle, you want to be in the larger cap names, greater dividend, more defensive, cash flow is better.
E.T.F.'s
TOP PICK
Is big tech the new defensive? After the inflation/interest rate scare of the spring, investors are runnuing back into these names. Of course, there are pros and cons. Stocks like Apple, Amazon and Microsoft boast explosive growth, but pay low/no dividends and trade at high PE's. Short answer: yes, you need to own at least some big tech to balance your steady eddys and dividend payers. While Apple is trading below US$150 per share, Alphabet (Google) is changing hands at over US$2,700 for a single share. The typical retail investor can't afford that, which why is VGT is handy. VGT charges only a 0.1% MER and pays a 0.66% dividend yield, which is modest, but remember that most tech names pay nada. Apple and Microsoft comprise 36% of VGT, so be comfortable with these two companies.
E.T.F.'s
PARTIAL SELL
Up 700% over 10 years.
Doesn't own it, but uses it as a benchmark to gauge his performance. You're probably going to get a pullback.
Given that it's such a large ETF, you might want to write some calls on it just a bit higher, and manage it as you go through. Roll up once it gets to the price target. Don't write the call too far out but, say, 1 month out.
E.T.F.'s
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