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An Apple staff member demonstrates a new Verizon iPhone 4 at Verizon's iPhone 4 launch event in New York, in this file picture taken January 11, 2011. (BRENDAN MCDERMID/REUTERS)
An Apple staff member demonstrates a new Verizon iPhone 4 at Verizon's iPhone 4 launch event in New York, in this file picture taken January 11, 2011. (BRENDAN MCDERMID/REUTERS)

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How to profit from the smart phone sector using ETFs Add to ...

The smart phone sector is one of the fastest growing industries in the world thanks to its continuing evolution. Smart phones have become much more than telephones. The industry has rolled out an impressive list on innovations recently, including touch screens, tablet computers, apps, etc.

Investing in the industry is possible through exchange traded funds. Investment choices range from conservative to high risk.

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The most conservative way to invest in the industry is through low-cost exchange traded funds tracking the telecom industry that distribute smart phone services. Several ETFs are available, including the Vanguard Telecom ETF , with a management expense ratio of only 0.24 per cent.

Investors with a higher-risk tolerance seeking an all-around participation in the industry may consider the Merrill Lynch Wireless HOLDRs . Units track a basket of smart phone providers, chip makers and service providers. Largest holdings include Qualcomm, Research in Motion, Vodaphone and Verizon. Unit volume is low.

Canadian investors may consider iShares S&P/TSX Capped IT . Units hold five Canadian technology stocks, including a 16 per cent weight in Research in Motion and a 13 per cent weight in Celestica. One of Celestica's largest functions is to provide electronic manufacturing services for the smart phone industry. Management expense ratio is 0.55 per cent.

The latest and most direct way to play the sector is through the First Trust NASDAQ OMX CEA Smartphone . The ETF tracks a basket of 73 equities primarily involved in the building, design and distribution of handsets, hardware, software and mobile networks associated with the development, sale and usage of smart phones. Largest industry weights are semiconductors, telecommunication equipment, mobile communications and electronic components & equipment. Largest equity holdings with a weight of less than 3.0 per cent are Samsung Electronics, Benchmark Electronics, HTC Corporation, Apple and Flextronics International. Management expense ratio is 0.70 per cent. The ETF started trading in February.

The acknowledged leader in the sector is Apple . ETFs in the smart phone sector have a history of following the general seasonal trend of Apple.



Chart courtesy of www.equityclock.com

Apple and related ETFs currently have a neutral chart. They have moved sideways since January.





Don Vialoux is the author of free daily reports on equity markets, sectors, commodities and Exchange Traded Funds. He is also a research analyst for JovInvestment Inc. Reports are available at www.timingthemarket.ca and www.equityclock.com. Follow him on Twitter @EquityClock.

 
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