The tech sector has performed favorably in recent times on the back of encouraging earnings results. Although Trump’s proposed trade and immigration policies are expected to weigh on big technology companies, his corporate tax repatriation plans could benefit technology companies that hold a lot of cash overseas. These tech companies could repatriate that cash and use it for investments, dividends and buybacks.
Tech behemoth Apple, Inc. (AAPL) made a strong rebound on the back of strong fiscal first-quarter earnings results. The good show was driven by impressive iPhone 7 and 7 Plus sales. 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.
Apple’s Q1 Earnings in Focus: It’s a Blowout Quarter
Apple’s fiscal first-quarter earnings of $3.36 per share and revenues of $78.4 billion easily topped the respective Zacks Consensus Estimate of $3.22 and $76.9 billion. On a year-over-year basis, earnings and revenues registered growth of 2.4% and 3.3% respectively. Services, which include revenues from Internet Services, App store, Apple Music, AppleCare, Apple Pay, licensing and other services, surged 18% year over year to nearly $7.2 billion.
Additionally, total iPhone unit sales came in at about $78.3 million, up 5% year over year. Revenues from iPhone also grew 5% from the year-ago quarter to $54.4 billion (69.4% of total revenue). Moreover, optimism of the tech behemoth’s forthcoming series of iPhone upgrades in the coming months encouraged some analysts to raise their price targets.
Apple Rally Boosts Tech Sector
Gains in Apple came as a breather for the broader technology sector.
The iPhone maker remained the biggest company in the index in terms of market capitalization. Along with Apple some other big tech companies like Microsoft Corporation (MSFT), Alphabet Inc (GOOGL), Netflix, Inc. (NFLX) and Facebook Inc (FB) reported solid earnings results.
Microsoft’s earnings per share (EPS) and revenues for fiscal Q2 beat our estimates, while Alphabet reported higher-than-expected revenues for the Q4. Both Netflix’s and Facebook’s top and bottom line for the Q4 beat our respective estimates.
For the overall Technology sector, we now have Q4 results from 84% of the sector’s total market cap. Total earnings for these companies are up +7.4% from the same period last year on +5.4% higher revenues, with 71.1% beating EPS estimates and 78.9% beating revenue estimates.
In the past three months, the tech sector jumped 9.8%, remaining one of the best performers among the S&P 500 sectors. In the last one month, the tech sector rose 2.7%, way above the S&P 500’s gain of 0.7%.
Additionally, mutual funds related to this sector registered strong returns. According to Morningstar, technology mutual funds have returned 10.6% over the last three months.
Buy These 3 Mutual Funds
Here, we have selected three mutual funds that have significant exposure to the tech sector and have Apple as one of its top three 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.
These funds have encouraging three-month and year-to-date (YTD) returns and minimum initial investment is within $5000. Also, each of these funds has a low expense ratio…