The tech sector has performed favorably in recent times on the back of encouraging earnings results.Tech behemoth Apple Inc. AAPL witnessed strong performance on the back of robust fiscal third-quarter earnings results. Higher iPhone average selling price boosted revenues for the quarter and eventually earnings. Following these promising trends, investing in technology mutual funds with a significant holding in the iPhone maker and other tech giants will be a prudent decision.
Q1 Earnings in Focus
Apple’s third-quarter fiscal 2018 results created new records in a seasonally slow quarter. Earnings of $2.34 per share not only crushed the Zacks Consensus Estimate by 17 cents but also surged 40.4% year over year. Net sales increased 17.3% year over year to $53.27 billion, which surpassed the Zacks Consensus Estimate of $52.34 billion. Apple benefited from robust iPhone and Services segment revenue growth.
Total iPhone unit sales of 41.30 million beat the Zacks Consensus Estimate and inched up 1% year over year on the back of iPhone X, iPhone 8 and iPhone 8 Plus. Revenues from iPhone (56.1% of sales) grew 20% from the year-ago quarter to $29.91 billion, while services revenues surged 31% year over year. (Read More: Apple Crushes Q3 Earnings Estimates, Sales Jump Y/Y)
Apple Rally Boosts Tech Sector
On Aug 2, tech behemoth Apple reached the milestone since its inception 42 years ago. Apple got a boost from strong quarterly earnings, following a significant boost in services revenues and increase in revenues from iPhone sales.
As of Aug 1, total earnings for the technology sector are up 35% on 12.9% higher revenues, with 89.7% beating EPS estimates and 87.2% beating revenue estimates.
The tech sector has jumped 14.3% so far this year, becoming the best performer among the S&P 500 sectors. Additionally, mutual funds related to this sector registered best returns among all the sector equity fund categories. According to Morningstar, technology mutual funds have returned 14.6%, year to date.
Buy These 4 Mutual Funds
Here we have selected four mutual funds that have significant exposure to the tech sector and have Apple as one of its top five holdings. Moreover, these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why should one be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These funds have encouraging one-year annualized returns. Their minimum initial investment is within $5000 and has a low expense ratio.
Columbia Global Technology Growth A CTCAX invests a huge part of its assets in common stocks, preferred stocks and securities that are convertible into common or preferred stocks. These equity securities are issued by technology companies that will benefit from technological advancements or improvements.
CTCAX carries an expense ratio of 1.31% compared with the category average of 1.41%. Moreover, CTCAXrequires a minimal initial investment of $2,000. The fund has one-year annualized returns of 32.5%.
CTCAXhas a Zacks Mutual Fund Rank #1. Further, as of the last filing, Microsoft, Alphabet and Apple were the top holdings for DTGRX.
BlackRock Science & Technology Opportunities Investor A BGSAX invests a major portion of its assets in equity securities issued by domestic and foreign science and technology companies. BGSAX may invest a maximum 25% of its net assets in emerging economies.
BGSAX carries an expense ratio of 1.17% compared with the category average of 1.41%. Moreover, BGSAX requires a minimal initial investment of $1,000. The fund has one-year annualized returns of 39.8%.
BGSAX has a Zacks Mutual Fund Rank #1. Further, as of the last filing, Microsoft, Alphabet, Amazon and Apple were the top holdings for DTGRX.
Deutsche Science and Technology A KTCAX invests a big portion of its assets in securities of companies of any size and involved in the science and technology sector. The fund may also invest in initial public offerings.
KTCAXcarries an expense ratio of 0.96% compared with the category average of 1.41%. Moreover, KTCAX requires a minimal initial investment of $1,000. The fund has one-year annualized returns of 29.3%.
KTCAX has a Zacks Mutual Fund Rank #2. Further, as of the last filing, Microsoft, Amazon and Apple were the top holdings for KTCAX.
Invesco Technology A ITYAX invests a bulk of its assets in equity securities of companies involved in technology-based industries. The fund primarily focuses on investing in common stocks of tech companies.
ITYAXcarries an expense ratio of 1.27% compared with the category average of 1.41%. Moreover, ITYAX requires a minimal initial investment of $1,000. The fund has one-year annualized returns of 24.4%.
ITYAXhas a Zacks Mutual Fund Rank #2. Further, as of the last filing, Amazon, Apple and Alphabet were the top holdings for ITYAX.
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