As I scoured the S&P 500 sectors over the weekend in search of the'easiest' hedge/short I came accross the technology sector (as measured by the SPDR Technology Sector ETF XLK) and noticed the following:
1. While the XLK is currently still 10% off the 2007 highs, it did put in a more than solid performance off the early 2009 lows of just over 100%. Clearly the heavy weighting of Apple didn't hurt, but still…that's not bad.
Just today I heard from two sources that they think technology is undervalued and hence their target spot for excess cash. I'm not disagreeing, but would point out that at this stage in the cycle it should pay to be somewhat more selective in which tech companies to invest in. Just looking at the top ten holdings of the XLK below, the charts of AAPL and CSCO have parted ways in a big way over the past twelve months and as such should provide different opportunities.
| 1 | Apple Inc. | AAPL | 12.06% |
| 2 | International Business Machines Corp. | IBM | 7.97% |
| 3 | AT&T Inc. | T | 7.14% |
| 4 | Microsoft Corp. | MSFT | 7.12% |
| 5 | Oracle Corp. | ORCL | 5.29% |
| 6 | Google Inc. Cl A | GOOG | 5.11% |
| 7 | Intel Corp. | INTC | 4.21% |
| 8 | Verizon Communications Inc. | VZ | 4.07% |
| 9 | Qualcomm Inc. | QCOM | 3.63% |
| 10 | Cisco Systems Inc. | CSCO | 3.59% |
As far as the technology sector's performance vs. the S&P 500 goes, I don't see any underperformance of tech vs the broader tape over the past years.
