Best bets in information technology

Standard & Poor's equity analyst highlights favored opportunities among tech stocks and ETFs.

By TheStockAdvisors Feb 3, 2012 2:50PM
Image: Dollar sign on keyboard (© Corbis)By Dylan Cathers, S&P Capital IQ Equity Analyst, S&P The Outlook

Information technology is one of four sectors that S&P Capital IQ's Sector Strategy Group currently recommends investors overweight in their portfolios.

For investors with a favorable outlook for the technology industry, S&P Capital IQ equity analysts like several large-cap technology stocks, including IBM (IBM), Oracle (ORCL), Microsoft (MSFT), and Apple (AAPL), which all earn our highest five-star "buy" rating.

Large capitalization stocks such as these tend to be widely held in ETFs. Those looking for exposure to the sector have several ETFs with an "overweight" recommendation to choose from.

To narrow the list, we concentrated on ETFs with "overweight" scores for both performance analytics and cost factors, and those that have track records longer than three years.

Not surprisingly, the top ETF in our screen, both in terms of annualized three-year return and market cap, is PowerShares QQQ Trust (QQQ). The QQQ tracks the price and yield of the NASDAQ-100 Index.

On average, our analysts have a neutral view of the stocks in the ETF's portfolio as measured by S&P STARS, but the fund receives a favorable score based on our proprietary S&P Fair Value metric. QQQ's risk considerations scores are generally positive, as are its cost factors.

Another strong-performing technology ETF is the Vanguard Information Technology Index Fund (VGT). Its objective is to track the MSCI US Investable Market Information 25/50 Index.

All three of our performance analytics measurements are positive, including S&P STARS, S&P Fair Value, and S&P Technical. VGT's risk considerations scores are generally positive, as are its cost factors.

Technology Select Sector SPDR Fund (XLK) is the final IT sector ETF that met our criteria. XLK's objective is to match the performance of the Technology Select Sector Index, which tracks a variety of IT industries, including computers & periph- erals, software, and IT services.

Like VGT, XLK's performance analytics scores are all positive. Its risk considerations and cost factors score are generally favorable as well.

Related articles:

0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

104
104 rated 1
252
252 rated 2
457
457 rated 3
639
639 rated 4
495
495 rated 5
538
538 rated 6
704
704 rated 7
503
503 rated 8
350
350 rated 9
140
140 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
UPLULTRA PETROLEUM Corp10
EOGEOG RESOURCES Inc10
TAT&T Inc9
COPCONOCOPHILLIPS9
DVNDEVON ENERGY CORPORATION9
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.