XNTK: Technology Dashboard For February

seekingalpha02-21

Technology is the most overvalued sector and its subsector with the worst value and quality scores is computers and hardware.Fast facts on SPDR® NYSE Technology ETF, an equal-weight ETF competing with...

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href=https://seekingalpha.com/article/4671715-xntk-technology-dashboard-for-february><strong>seekingalpha</strong></a>\n\n\n</h4>\n\n</header>\n<article>\n<div>\n<p>Technology is the most overvalued sector and its subsector with the worst value and quality scores is computers and hardware.Fast facts on SPDR® NYSE Technology ETF, an equal-weight ETF competing with...</p>\n\n<a href=\"https://seekingalpha.com/article/4671715-xntk-technology-dashboard-for-february\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"BK4516","symbol_name":"特朗普概念","start_time":0,"source_url":"https://seekingalpha.com/article/4671715-xntk-technology-dashboard-for-february","article_id":"2413628437","we_media_id":null,"thumbnails":[],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2413628437","pubTimestamp":1708471160,"sourceInfo":{"source_id":"seekingalpha","name":"Seeking 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ACC"},"translate_title":"XNTK：2月份的技术仪表板","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"XNTK":1,"AAPL":1,"MSFT":1,"QS":1,"ROE":1,"RSPT":1,"GM":1,"SY":1,"VS":1,"XLK":1,"FDN":0.9,"UBER":0.63},"content_text":"Technology is the most overvalued sector and its subsector with the worst value and quality scores is computers and hardware.Fast facts on SPDR® NYSE Technology ETF, an equal-weight ETF competing with Invesco S&P 500® Equal Weight Technology ETF.6 tech stocks cheaper than their peers in February 2024.   Viorel Kurnosov/iStock via Getty Images This monthly article series shows a dashboard with aggregate industry metrics in information technology. It may also serve as a top-down analysis of sector ETFs like Technology Select Sector SPDR ETF (XLK) and SPDR® NYSE Technology ETF (NYSEARCA:XNTK), whose holdings are used to calculate these metrics. Shortcut The next two paragraphs in italic describe the dashboard methodology. They are necessary for new readers to understand the metrics. If you are used to this series or if you are short of time, you can skip them and go to the charts. Base Metrics I calculate the median value of five fundamental ratios for each industry: Earnings Yield (EY), Sales Yield (SY), Free Cash Flow Yield (FY), Return on Equity (ROE), Gross Margin ((GM)). The reference universe includes large companies in the U.S. stock market. The five base metrics are calculated on trailing 12 months. For all of them, higher is better. EY, SY and FY are medians of the inverse of Price/Earnings, Price/Sales and Price/Free Cash Flow. They are better for statistical studies than price-to-something ratios, which are unusable or non available when the \"something\" is close to zero or negative (for example, companies with negative earnings). I also look at two momentum metrics for each group: the median monthly return (RetM) and the median annual return (RetY). I prefer medians to averages because a median splits a set in a good half and a bad half. A capital-weighted average is skewed by extreme values and the largest companies. My metrics are designed for stock-picking rather than index investing. Value and Quality Scores I calculate historical baselines for all metrics. They are noted respectively EYh, SYh, FYh, ROEh, GMh, and they are calculated as the averages on a look-back period of 11 years. For example, the value of EYh for hardware in the table below is the 11-year average of the median Earnings Yield in hardware companies. The Value Score (VS) is defined as the average difference in % between the three valuation ratios ((EY, SY, FY)) and their baselines (EYh, SYh, FYh). The same way, the Quality Score (QS) is the average difference between the two quality ratios ((ROE, GM)) and their baselines (ROEh, GMh). The scores are in percentage points. VS may be interpreted as the percentage of undervaluation or overvaluation relative to the baseline (positive is good, negative is bad). This interpretation must be taken with caution: the baseline is an arbitrary reference, not a supposed fair value. The formula assumes that the three valuation metrics are of equal importance. Current data The next table shows the metrics and scores as of writing. Columns stand for all the data named and defined above.     VS QS EY SY FY ROE GM EYh SYh FYh ROEh GMh RetM RetY   Hardware -43.24 -30.20 0.0044 0.6414 0.0336 3.72 33.00 0.0346 0.9609 0.0370 6.32 40.89 0.93% 26.74%   Comm. Equip. -11.38 10.86 0.0306 0.2901 0.0228 20.56 60.56 0.0312 0.2680 0.0383 16.39 62.91 -0.46% -12.21%   Electronic Equip. -7.86 -11.02 0.0400 0.5816 0.0386 15.87 20.63 0.0402 0.7613 0.0384 13.33 35.00 6.98% 0.19%   Software -24.12 8.98 0.0212 0.1051 0.0256 22.07 82.07 0.0250 0.1582 0.0335 18.07 85.66 5.61% 10.45%   Semiconductors -31.84 9.62 0.0298 0.1611 0.0216 31.26 57.74 0.0442 0.2275 0.0326 24.66 62.45 2.80% 5.29%   IT Services -31.10 9.80 0.0325 0.1647 0.0197 30.40 58.97 0.0367 0.3040 0.0308 26.96 55.18 3.25% 5.10%   Click to enlarge Value And Quality chart The next chart plots the Value and Quality Scores by industry (higher is better). Value and Quality in technology (chart: author; data: Portfolio123) Evolution since last month Both value and quality scores have significantly deteriorated in the hardware industry. Score variations (chart: author; data: Portfolio123) Momentum The next chart plots momentum scores based on median returns. Momentum in technology (chart: author; data: Portfolio123) Interpretation According to my S&P 500 monthly dashboard, technology is the most overvalued sector. The communication equipment and electronic equipment industries are moderately overvalued, respectively by about 11% and 8% relative to 11-year averages. A good quality score may partly offset overvaluation for communication equipment. Other subsectors are overvalued by more than 24% relative to their historical baseline, and quality scores don’t justify it. The less attractive tech industry is computers and hardware, where both value and quality scores are far below the baseline. Fast facts on XNTK SPDR NYSE Technology ETF started investing operations on 9/25/2000 and tracks the NYSE Technology Index. It has 35 holdings and an expense ratio of 0.35%, whereas the capital-weighted ETF XLK has a 0.09% fee. As described by SSGA, the index is composed of 35 leading U.S.-listed technology-related companies. (…) Stocks must also meet at least one of the following three revenue- and sales-based criteria: (i) have an increase in sales over the last twelve months, (ii) have only one consecutive quarter of negative sales growth over the last two years, or (iii) have revenue totals from the last four quarters that classify it within the top 75 companies within the specific industry classification (…) The Index is equal-weighted and rebalanced annually. Positions are in equal weight after every annual rebalancing, but they may drift with price action: current weights are between 2% and 3.8%. The next table shows the top 10 holdings now with their current weights and fundamental ratios. These are the constituents with the best momentum since the last rebalancing. They represent 33.4% of asset value, and the heaviest position weighs less than 4%. Risks related to the top holdings are much lower than for capital weighted ETFs like XLK, where Apple Inc. (AAPL) and Microsoft Corporation (MSFT) together represent about 42% of asset value.   Ticker Name Weight% EPS growth %TTM P/E TTM P/E fwd Yield%   NVDA Nvidia Corporation 3.78 222.20 95.88 58.63 0.02   META Meta Platforms, Inc. 3.59 73.52 31.77 23.78 0.42   AMD Advanced Micro Devices, Inc. 3.38 -40.86 332.26 47.49 0   AVGO Broadcom Inc. 3.31 25.65 37.81 26.72 1.69   ASML ASML Holding N.V. 3.29 46.07 43.17 45.25 0.71   UBER Uber Technologies, Inc. 3.26 118.76 89.40 63.51 0   NFLX Netflix, Inc. 3.23 20.72 48.59 34.08 0   LRCX Lam Research Corporation 3.21 -30.47 35.80 31.85 0.86   TSM Taiwan Semiconductor Manufacturing Company Limited 3.17 -20.85 24.44 20.73 1.52   AMAT Applied Materials, Inc. 3.14 13.91 23.48 24.32 0.64   Click to enlarge Data calculated with Portfolio123. Over the last 10 years, XNTK has underperformed XLK, but it is ahead of another equal-weight technology ETF: Invesco S&P 500 Equal Weight Technology ETF (RSPT). XNTK vs. XLK, RSPT, 10-year return (Seeking Alpha) XNTK is the best performer of these three funds over the last 12 months: XNTK vs. XLK, RSPT, 12-month return (Seeking Alpha) In summary, XNTK is an equal-weight technology ETF competing with RSPT and targeting investors seeking exposure to the technology sector without excessive weight in mega-cap companies. XNTK has a marginally lower fee (0.35% vs. 0.40%) and shows a better performance. Nevertheless, its liquidity is lower, with an average daily trading volume of about $3.8M, whereas RSPT is at $18.6M. Therefore, long-term investors may prefer XNTK, whereas RSPT is better suited for short-term trading. Dashboard List I use the first table to calculate value and quality scores. It may also be used in a stock-picking process to check how companies stand among their peers. For example, the EY column tells us that an IT services company with an earnings yield above 0.0325 (or price/earnings below 30.77) is in the better half of the industry regarding this metric. A Dashboard List is sent every month to Quantitative Risk & Value subscribers with the most profitable companies standing in the better half among their peers regarding the three valuation metrics at the same time. The list below was sent to subscribers several weeks ago based on data available at this time.   EXTR Extreme Networks, Inc.   CARS Cars.com Inc.   CARG CarGurus, Inc.   TEL TE Connectivity Ltd.   IDCC InterDigital, Inc.   GEN Gen Digital Inc.   Click to enlarge  It is a rotational model with a statistical bias toward excess returns on the long term, not the result of an analysis of each stock.","kind":null,"is_publish_news":null,"is_publish_highlight":null,"is_publish_live":null,"is_publish_wemedia":null,"editions":null,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.22.4","shortVersion":"4.22.4","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2413628437"}