Important Updates for Investors
Carla Pasternak's Premiere Issue of High-Yield International Just
Released
Income expert Carla Pasternak's debut issue of High-Yield
International covers a Taiwanese manufacturer yielding 9.5%... a
rare Mexican monopoly yielding 13.4%... and other top-performing
investments yielding up to 19.0%.
Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it
is mandated by law. And I've identified the ONLY stock positioned to
capture this growth.
The
Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income
investors. This massive spending, combined with movement out of U.S.
Treasuries, is going to take its toll on the dollar, and
international income investors could reap the rewards in the form of
higher dividends. |
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| ETF
Spotlight -- Technology SPDR (XLK) |
Published: May 24, 2004
The Technology SPDR (XLK) is an exchange-traded fund
that represents an interest in a diversified basket of technology
stocks. The fund is a good choice for investors who want to make a pure
technology bet in the market, but who do not want to invest in such
narrowly-focused funds as the Semiconductor HOLDR (SMH), Software HOLDR
(SWH), Broadband HOLDR (BDH) or Internet HOLDR (HHH). Looking at its
individual components, however, the fund remains heavily weighted in the
twin gorillas of the technology industry: Microsoft (MSFT) and Intel
(INTC). These two firms account for 13.22% and 8.40% of the fund's
value, respectively. By comparison, MSFT and INTC comprise 7.98% and
5.31% of the Nasdaq-100 Trust (QQQ). Meanwhile, each accounts for
greater than 22% of its respective HOLDR (software for MSFT and
semiconductor for INTC).
XLK also includes technology giant International
Business Machines (IBM), yet this stock is not a component of SMH, SWH
or QQQ. Although IBM combines services and hardware, it is difficult to
imagine making a broad investment in the technology sector without
including IBM. More importantly, ownership of XLK also gives you a
strong exposure to the telecom arena. For example, communications
equipment accounts for 15.35% of the fund, diversified telecom services
12.84%, and wireless telecom services 3.48%. In total, telecom stocks
account for a greater than 30% of the fund's value.
XLK is not a good choice for day trading. Although fairly liquid, its
average volume of well under one million shares per day does not lend
itself well to that type of trading activity. SMH and QQQ are far better
tools for that kind of strategy. However, XLK does offer good swing
trading opportunities. Because the fund holds shares of companies in
related--but not always perfectly correlated--industries, XLK is not as
volatile as QQQ, making it a bit safer to trade. For example, the
average daily trading range in QQQ was 2.3% in 2003, yet that same
figure stood at only 1.8% for XLK.
| Technology
SPDR (XLK) |
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| Type: |
Sector Fund |
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| Similar
funds: |
Software
HOLDR (SWH) |
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Semiconductor
HOLDR (SMH) |
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Broadband
HOLDR (BDH) |
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| Options?: |
Yes, Illiquid |
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| Performance
Data |
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| 52-week
High: |
$22.24 |
1/20/2004 |
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Annualized
return since: |
| 52-week
Low: |
$15.88 |
5/22/2003 |
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One-year |
23.79% |
| YTD
Return: |
-3.80% |
(as
of 5/21/2004) |
Three-year |
-13.72% |
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Five-year |
-12.03% |
| Dividends: |
$0.18 |
past
12-mos |
Life of fund* |
-8.76% |
| Expense
Ratio: |
0.28% |
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*
- Started trading 12/22/1998 |
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| Correlation
Data* |
(1/02/02-4/30/04) |
Holdings* |
(as of 5/19/2004) |
| Dow
Jones Industrials |
83.9% |
|
Microsoft (MSFT) |
13.22% |
| S&P
500 |
|
88.7% |
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Intel (INTC) |
8.40% |
| Nasdaq
Composite |
96.9% |
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IBM (IBM) |
7.07% |
| Nasdaq-100 |
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97.0% |
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Cisco Systems
(CSCO) |
7.00% |
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Verizon Comm. (VZ) |
4.76% |
| SWH |
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89.6% |
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Dell Computer (DELL) |
4.18% |
| SMH |
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91.5% |
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Hewlett Packard
(HPQ) |
3.01% |
| BDH |
|
84.0% |
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SBC Comm. (SBC) |
2.94% |
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Oracle (ORCL) |
2.83% |
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Qualcomm (QCOM) |
2.47% |
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* Percent top ten
are of total |
55.88% |
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| Average
Daily Volume |
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Average
Daily Price Range |
| Apr-04 |
489,976 |
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Apr-04 |
1.8% |
| 2004
YTD |
707,361 |
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2004 YTD |
1.8% |
| 2003 |
695,641 |
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2003 |
2.2% |
| *
- Correlation measures how closely the two items track each
other |
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*
Includes prior day's close (true range) |
HOW TO MAKE MONEY IN XLK THIS
YEAR
The Technology SPDR appears to be putting in a short-term bottom.
Looking ahead, I see a small chance that the fund could perhaps exceed
its January high of $22.24. On the downside, there is risk to a fall
towards the 38.2% retracement back to the March 2003 low, which comes in
at $18.87. However, the potential trendline from the summer 2002 low
should offer a strong support area for those willing to buy into the
current market difficulties. The potential is for a rally of greater
than +10% from here in the near term.
My longer-term outlook for the fund is a bit of a concern though.
Technology firms tend to be heavily leveraged, so rising interest rates
will hurt them. If the economy does slow, which I expect to happen in
2005, then the tech sector will be one of the first to sniff it out and
feel its impact. Ultimately, I expect XLK to drop below $17 by late 2004
or early 2005. However, given the fund's likely near-term move back
above $20 (and possibly to a new high), I would not be a seller here
just yet.
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