The shining outlook for the best performing sector of 2018 — technology — is seeing no signs of dimming. Buoyed by encouraging industry fundamentals, including a rising interest rate scenario and solid demand for cutting-edge technology as well as surging FANG stocks, the sector continues to retain its top spot.
Now, the upbeat data on personal computer (PC) shipments, which have been feeble over the past several years, have bolstered investors’ confidence in the sector. This is especially true, as global PC shipments had enjoyed the strongest quarter in six years with 2.7% growth per the International Data Corp (IDC) and the first year-over-year increase of 1.4% since the first quarter of 2012 according to Gartner (see: all the Technology ETFs here).
The robust performance is driven by stronger demand from business customers though consumer demand remained muted due to the strong adoption of smartphones. Desktop and notebook were the biggest drivers as the market continued to grow for both premium as well as entry models. This has resulted in a resilient outlook for the computer hardware and software segment.
While hardware segment growth has slowed in recent years, new products like virtual reality headsets and wearables is expected to revolutionize the segment as strong demands for these technologies can fuel ongoing innovation in routers, servers and data storage devices. Coming to software, it is already seeing huge growth with cloud being the biggest driver. A rise in spending on PCs and tablets will further add to their growth outlook.
Given this, investors seeking to tap this corner of the broad tech space could consider the following ETFs. These funds have a Zacks ETF Rank #1 (Strong Buy) or 2 (Buy), suggesting their outperformance to continue:Â
iShares North American Tech ETF (IGMÂ -Â Free Report)
This ETF tracks the S&P North American Technology Sector Index, giving investors exposure to 297 electronics, computer software and hardware, and informational technology companies. The fund has AUM of $1.5 billion and charges 48 bps in annual fees. It trades in a moderate volume of nearly 53,000 shares in hand a day and has a Zacks ETF Rank #1 with a Medium risk outlook (read:Â 5 Hot Tech ETFs & Stocks Leading the Market Rally).
