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ETF Pick - Proshares Ultra Technology (ROM)

 July 18, 2011 12:31 PM


ProShares Ultra Technology is an ETF that invests in the technology segment. The fund has 55.7 percent of assets invested in technology hardware and equipment companies, and 44.3 percent invested in software and computer services companies. ProShares Ultra Technology spreads its assets across 72 companies within the technology sector.

The fund has a price/earnings ratio of 15.15, a price/book-value ratio of 3.34, and a dividend yield of .99 percent as of June 30. The fund had an average index market capitalization of $20.14 billion.

Although uncertainties within the technology sector still prevail, ProShares Ultra Technology has some of the leading companies within the sector among its top holdings. Its' top holding as of July 15 are,

[Related -Positive Vibes From Europe Helps U.S. Market To End On A Positive Note; S&P’s Decision In Focus]

Company

Weight

Apple Inc.

14.95 percent

International Business Machines Corp.

9.56 percent

[Related -U.S. Market End The Day On A Mixed Note; Technology Sector On A High]

Microsoft Corp.

8.94 percent

Google Inc.

6.63 percent

Oracle Corp.

5.48 percent

Intel Inc.

5.48 percent

http://www.proshares.com/funds/rom_index.html

 

Here's a closer look at the ETF's components:

Apple Inc. (AAPL) – Apple is ROM's top holding, and the company is a dominant force within the technology sector. Apple manufactures the top selling smartphone of 2011, the iPhone, and the best-selling tablet, the iPad. 

Analysts expect Apple to beat estimates when its releases 3Q 2011 earnings tomorrow. The company is also expected to have its best quarter of smartphone and tablet sales to date. Owing to massive demand and some supply constraints, Apple wasn't able to sell as many iPad 2's as expected in the last quarter, but sales should be in line with company and analyst expectations for this quarter.

The company is expected to earn $5.76 per share this quarter, as compared with $3.51 in the comparable year ago period. Revenue is expected to come in between $23.6 billion and $27.45 billion as against revenue of $15.7 billion in Q3 2010.

International Business Machines Corp.(IBM): - IBM is the largest technology services company in the world. In addition the company also produces computer hardware and infrastructure.

IBM has raised its outlook for FY 2011, and the company expects the year's earnings to total at least $13.15 per share. The company earned $ 11.52 per share in FY 2010. IBM caters heavily to corporate customers, and IT spending among businesses is expected to ramp up going forward.

IBM reports Q2 2011 earnings today. Analysts expect the company to earn $3.02 per share on revenue of 425.3 billion. In the comparable year-ago period, the company reported earnings of $2.61 on revenue of $23.7 billion.


Microsoft Corp. (MSFT) – Microsoft is another technology heavyweight within ROM's holdings. The company has been very successful with its Windows operating system and is now looking to make inroads into cloud computing and mobile operating systems.

The company recently launched Office 365 – a cloud computing platform that offers users a range of applications and services. Microsoft is also heavily focused on developing its mobile operating system, Windows Phone 7, as it takes aim at Apple's and Google's dominance here.

In addition the company recently announced it is going to acquire internet telephony provider, Skype. This gives it an opportunity in the lucrative social media segment, especially after Facebook announced it was integrating Skype into its social network.

Microsoft releases its Q4 and FY 2011 results on July 21, and the company is expected to earn $0.58 per share on revenue of $17.2 billion. In the corresponding year-ago quarter, the company earned $0.51 per share on revenue of $16.0 billion.

Quite a few of ROM's holdings are expected to release their results in the next few days, and a good round of earnings from the sector should boost this fund's value. The technology sector is poised for recovery after a shaky first half of the year and this too should benefit ROM. We believe that along with a strong portfolio of stock and the anticipated improvement of the sector, ROM is a good investment for anyone seeking exposure in technology.

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