When we wrote on October 26th about waking to find our cat and dog sleeping together, we had no idea that Apple’s rare earnings miss the prior evening would lead it to lose another third of its value. The Vanguard Information Technology Fund (VGT) was not among those mentioned with the highest weights in Apple that morning but it is today. We mention it because it is also Quant’s top ranked fund today.
We have to think its 17.29% weight in Apple Inc. (the highest of any ETF) is boosting VGT’s very high 97.7 Fundamental Score with high 90s in all the sub categories except for the 100 yield score. The 58.6 Behavioral Score you see on its ETFGsm tear sheet is nothing to get excited about and its subcomponent technical score, seen on the Quant page, is even worse at 50.3 and falling. Sentiment is improving at 66.8 today as bears are circling the wounded technology sector, especially with another rare earnings miss, this time from IBM which has VGT’s second highest weight at 7.2% and could hold it back short term. The beautiful pie charts on its tear sheet show diversification within the technology sector among hardware, software and services. You can see all 419 constituents including all the big names but also most of the little ones you may not recognize.
Our models are not designed to call bottoms but to recognize a confluence of factors that produce a high probability of outperformance in the intermediate term. The market is shunning technology but the strong fundamentals the sector enjoys should eventually bring out the value buyers and Quant likes VGT more than any of the other 737 equity ETFs in today’s scoring. IBM says that “Big Data” will drive their future and we are believers in the power of data to illuminate otherwise hidden information. The ETF Global models were not possible before voluminous data became available in recent years but now deliver to you something that was only possible before in the highest priced hedge funds or university research departments. The performance reports we covered the past two days is testament to the value that ETF Global adds.
We will now let you get back to the exciting movie unfolding on our TV screens this morning, congratulations to the Boston and Federal authorities on a job well done. Don’t mess with the USA, especially on Patriots Day!