Morningstar Rating

ETF Research and Analysis

by Robert Goldsborough
Suitability
Technology Select Sector SPDR XLK offers investors broad exposure to the technology sector. As a sector-specific exchange-traded fund, XLK should be viewed as a tactical investment, suitable only for the satellite portion   Read more 

Bull Case

This fund has a very high-quality portfolio. About 95% of XLK's investments are in companies that have economic moats, or firms that our equity analysts believe have durable competitive advantages.
The top holdings in this fund have strong balance sheets, which should support continued investment in research and development and growth strategies.
This fund is the most liquid of any technology sector ETF. Read more 

Bear Case

The top-10 holdings account for 61% of this fund's portfolio, which means that its performance and risk attributes are closely tied to just a handful of stocks.
A pullback in IT spending could weigh on the performance of this ETF. Some of this ETF's companies will be negatively affected by what many are calling a secular decline in PC demand.
The companies in this ETF operate in highly competitive industries characterized by rapid innovation that could quickly erode a company's economic moat. Read more 

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