3 Best Inexpensive Technology Mutual Funds for 2018

As of yesterday, earnings for the Zacks Computer and Technology sector were up +23.3% from a year ago, with revenues up +10.9%.  This amazing performance is not expected to be an isolated to Q3 17, as current estimates are pointing to double digit growth over the next three quarters as well.  Within the tech sector, the three biggest areas of growth are expected to come from the cloud, IoT (internet of things), and data centers.  The table below shows the earnings and revenue growth for the most recent time periods, and some historical context.

It is also important to point out that these growth numbers are not accounting for any new tax changes.  These tax cuts and potential repatriation could be a significant tailwind for these companies in the coming quarters as well.  The repatriation could be used for share buybacks, and increased dividend payments.  While the tax cuts will also help the bottom line.  

With the technology sector expected to see sizable growth over the next several quarters, we wanted to identify the best tech heavy mutual funds to take advantage of this extended uptick.  First, we started with the Zacks Mutual Fund Screener, and looked for funds that had at least 75% exposure to technology growth stocks, a low expense ratio, no load fees, 1 year total return of +20% or better, 3 year total return of 15% or better, and a Zacks Rank #1 (Strong Buy), or a Rank #2 (Buy).  From the results, we picked the top 3 (out of 6 that met these criteria).

The Picks

Columbia Global Technology Growth (CMTFX), a Zacks Rank #1 (Strong Buy) seeks capital appreciation by investing at least 65% of its assets in equity securities of technology companies that may benefit from technological improvements, advancements or developments and which have attractive growth prospects.

Current Sector Allocation:  As of the last filing, the company has 79.62% of the portfolio in the technology sector, with small weightings in Other (6.5%), and Finance (3.7%).

Cost Specifics: There is a $2,000 minimal initial investment requirement, it has a 0.87% management fee with a total expense ratio of 1.08%.

Performance and Management: The YTD return is +33.79%, 1 year +34.02%, 3 year +20.71%, and 5 year +23.29%.  The fund is team managed with Rahul Narang, Portfolio Manager, as the lead.  Rauhl has a B.S. in business administration from California Polytechnic State University.

Top 5 Holdings: As of the most recent filing, the top positions are held in Alphabet, Apple, Microsoft, Facebook, and Amazon.

Fidelity Select Electronics (FSELX), a Zacks Rank #1 (Strong Buy) seeks capital appreciation. The fund normally invests at least 80% of assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components (semiconductors, connectors, printed circuit boards, and other components); equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors.

Current Sector Allocation:  As of the last filing, the company has 94.44% of the portfolio in the technology sector, with small weightings in Other (5%), and Services (0.3%).

Cost Specifics:  There is a $2,500 minimal investment requirement, it has a 0.55% management fee, a 0.75% redemption fee, with at total expense ratio of 0.75%.  

Performance and Management:  The YTD return is +21.15%, 1 year +26.38%, 3 year +21.93%, and 5 year +26.27%.  The fund is team managed with Stephen Barwikowski, Portfolio Manager, as the lead.  Stephen has B.S. of science degree in finance and operations and strategic management from Boston College.

Top 5 Holdings: As of the most recent filing, the top positions are held in Intel, Qualcomm, Broadcom, Analog Devices, and Micron Tech.

Putnam Global Technology (PGTYX), a Zacks Rank #1 (Strong Buy), seeks capital appreciation by investing mainly in common stocks of companies worldwide in the technology industries believed to have favorable investment potential. Under normal circumstances, the Fund will invest at least 80% of the Fund's net assets in securities of companies in the technology industries.

Current Sector Allocation: As of the last filing, the company has 77.59% of the portfolio in the technology sector, with small weightings in Finance (8%), and Other (6.3%).

Cost Specifics: There is no minimal investment requirement, it has a 0.62% management fee, with a total expense ratio of 1.04%.  

Performance and Management:  The YTD return is +39.23%, 1 year +37.06%, 3 year +21.65%, and 5 year +18.9%.  The fund is managed by Di Yao, Portfolio Manager, who holds a M.B.A. from Columbia University.

Top 5 Holdings: As of the most recent filing, the top positions are held in Alphabet, Apple, Facebook, Microsoft, and Applied Materials.

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