A Smarter Way to Buy the Dip in Nasdaq Stocks
Wed Jun 28 2017
Rachel Long (508 articles)

A Smarter Way to Buy the Dip in Nasdaq Stocks

The number of tech stories has been dizzying in 2017…

Machine learning, artificial intelligence and Internet of Things companies are minting profits for investors.

They’re changing industries. They’re altering the traditional ways in which business has been done. And they’re rewarding those who embrace these technologies, which increase productivity, increase efficiency and lower costs.

The popular cryptocurrency bitcoin has risen 134.7% in 2017. And that includes a major pullback from its June 11 peak of $ 3,018.

And the FAANG stocks – Facebook (Nasdaq: FB), Apple (Nasdaq: AAPL), Amazon.com (Nasdaq: AMZN), Netflix (Nasdaq: NFLX) and Alphabet (Nasdaq: GOOG) – have left the broader markets in their dust…

 

Each has gained more than 20% in 2017. And except for Apple, they’re all up more than 200% in the last five years.

Beyond this, shares of Tesla (Nasdaq: TSLA) have surged more than 70% this year. And the high-end electric car maker now has a market cap larger than that of Ford (NYSE: F).

For a lot of investors looking to get into these opportunities – particularly with the recent dips – the sheer cost dissuades them.

I don’t believe that a company’s share price should stop investors. But I do understand that at today’s prices, buying just one share of each of the FAANGs costs $ 2,355.60. And one bitcoin will run you $ 2,400.

For investors – both novice and seasoned alike – we live in a time in which there are plenty of low-cost options, like exchange-traded funds (ETFs), that allow exposure to a variety of great companies.

And beyond basic sectors, subsectors or country ETFs, there are thematic ones. These target a specific group of opportunities.

For example, let’s say you want exposure to the FAANGs, bitcoin, some biotechs, social media companies and the Chinese premium tech companies like Alibaba (NYSE: BABA) and Baidu (Nasdaq: BIDU).

There’s an ETF for that: ARK Innovation ETF (NYSE: ARKK)… and the slightly different ARK Web x.0 ETF (NYSE: ARKW).

In Web x.0, the largest holding is Amazon, followed by the Bitcoin Investment Trust (OTC: GBTC), athenahealth (Nasdaq: ATHN), 2U (Nasdaq: TWOU) and Tesla.

In total, the ETF holds 40 positions.

The Innovation ETF is different. It holds 50 companies, and its largest holding is the Bitcoin Investment Trust, followed by Tesla, athenahealth, 3-D printer Stratasys (Nasdaq: SSYS) and Amazon.

Though the Innovation ETF has performed slightly better, both have done well, up roughly 40% or more.

buy the dip nasdaq stocks 2

For comparison, the Technology Select Sector SPDR Fund (NYSE: XLK) is up just 13.9% this year, while the iShares Nasdaq Biotechnology ETF (Nasdaq: IBB) and the Vanguard Information Technology ETF (NYSE: VGT) have gained only 17%.

The Web x.0 ETF gives you exposure to all the FAANGs. The Innovation ETF holds just the FANGs (no Apple). But both provide exposure to Asian tech companies like Nintendo (OTC: NTDOY), Alibaba, Tencent (OTC: TCEHY) and SoftBank (OTC: SFTBY), as well as the Bitcoin Investment Trust.

On Tuesday, the Nasdaq got hammered pretty hard once again.

The tech index fell 1.6%. Though, as you may remember, I recently pointed out that the Nasdaq rarely ever does well in June.

But on Tuesday, big components like Alphabet slipped 2.6%, as NVIDIA and Netflix fell nearly 4%.

The Web x.0 ETF slipped 2.2% as the Innovation ETF pulled back 2.16%.

That’s not the only bump the ETFs have had to overcome. Since its June 11 high of more than $ 3,000, bitcoin is down 17.9%.

But here, we can see the benefits a diverse ETF can offer…

The day before, the Innovation ETF set a new 52-week high of $ 31, and the Web x.0 ETF hit a new 52-week high of $ 37.07.

On the whole, they’ve pushed higher, driven by the other elements.

The Innovation ETF is currently 5.8% below its June 26 high. Meanwhile, the Web x.0 ETF is 4.8% off that mark.

So if you’re looking to snag a piece of bitcoin and some tech stocks during this dip, remember that there are plenty of opportunities available. And in many cases, taking a step beyond a vanilla “technology” ETF – and trying out a thematic one instead – can offer a lot more upside.

 

Rachel Long

Rachel Long

Rachel Long is our Desk Correspondent covering Stock Markets across the globe. She is based in New York

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