When many investors think of tech stocks, they think of the NASDAQ (NDX), and with good reason: the exchange is home to many of the world’s top tech companies. While the New York Stock Exchange (NYSE) doesn’t necessarily get as much attention from tech investors, it’s not to be overlooked, as the ETF that invests in the NYSE Technology Index, the SPDR NYSE Technology ETF (NYSEARCA:XNTK), quietly outperformed the NASDAQ this year by a significant margin.
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There’s no question that the NASDAQ had a great year, gaining an incredible 54.5% year-to-date as we head into the close of 2023. But XNTK did even better, posting a jaw-dropping 71.3% gain year-to-date.
I’m bullish on XNTK going forward based on the compelling group of high-powered tech stocks that it owns and its strong performance track record. I also view it as a good way for people investing in NASDAQ ETFs to gain additional exposure to some tech stocks they may miss out on by only investing in the NASDAQ. Let’s take a closer look at this under-the-radar but high-flying tech ETF.
What is the XNTK ETF’s Strategy?
Fund sponsor State Street explains that XNTK “seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the NYSE Technology Index,” an “index composed of 35 leading US-listed technology-related companies.”
This index includes companies in the Information Technology sector and technology-related stocks from the Consumer Discretionary sector.
Unlike many other ETFs, XNTK is equal-weighted at its annual rebalance. This is why it isn’t dominated by a handful of mega-cap tech stocks like many other popular tech ETFs, as discussed below.
What Stocks Does XNTK Own?
XNTK only owns 37 stocks, but its top 10 holdings only account for 30.1% of its assets.
Below is an overview of XNTK’s top 10 holdings from TipRanks’ holdings tool.
As you can see, semiconductor stocks account for many of XNTK’s top 10 holdings. The top seven holdings are all related to the semiconductor industry, and this has helped to drive XNTK’s strong performance in 2023 as semiconductor stocks have soared based on advances in artificial intelligence.
Top holding Broadcom (NASDAQ:AVGO) has gained over 105.5% year-to-date, while other prominent holdings like Advanced Micro Devices (NASDAQ:AMD), Intel (NASDAQ:INTC), and Lam Research (NASDAQ:LRCX) gained 127.6%, 95.2%, and 91.5%, respectively.
While semiconductor stocks are heavily represented and have driven much of XNTK’s strong 2023 performance, many other types of technology stocks are represented: Intuit (NASDAQ:INTU), Netflix (NASDAQ:NFLX), and Booking Holdings (NASDAQ:BKNG) round out the top 10.
Outside of its top holdings, XNTK owns some of China’s largest tech stocks, such as Alibaba (NYSE:BABA) and PDD Holdings (NASDAQ:PDD). While Alibaba struggled this year, PDD surged to a year-to-date gain of 78.9%. Uber (NYSE:UBER) was another one of XNTK’s big winners, with a 150.6% gain.
TipRanks’ Smart Score system rates XNTK’s portfolio highly. The Smart Score is a proprietary quantitative stock scoring system created by TipRanks. It gives stocks a score from 1 to 10 based on eight key market factors. A score of 8 or above is equivalent to an Outperform rating.
Seven of XNTK’s top 10 holdings feature Outperform-equivalent Smart Scores of 8 or higher, including Broadcom, Advanced Micro Devices, and Intel, which all boast perfect 10 Smart Scores.
XNTK itself features an ETF Smart Score of 8.
Because XNTK rebalances to an equal weighting annually, it isn’t dominated by a small handful of mega-cap tech stocks, making it a less concentrated option than popular tech ETFs like the Invesco QQQ Trust (NASDAQ:QQQ) or the Technology Select Sector SPDR Fund (NYSEARCA:XLK).
For example, QQQ’s top 10 holdings account for 45.7% of the fund, with its top two positions, Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), making up 17.8% of assets.
Meanwhile, XLK’s top 10 holdings make up 69.2% of the fund, with Apple and Microsoft combining to make up 44.5% of assets.
XNTK owns these stocks, too, but as discussed above, its top 10 holdings make up just 30.5% of the fund, and Microsoft and Apple combine to make up just 5.4% of holdings.
Long-Term Performance
Over the past three years, XNTK has delivered an underwhelming annualized return of 5.8% (as of November 30).
But over the long term, it has generated excellent returns. As of November 30, XNTK has produced a five-year annualized return of 19.3% and a 10-year return of 17.4%.
These five- and 10-year returns compare favorably to the broader market. For example, as of November 30, the Vanguard S&P 500 ETF (NYSEARCA:VOO) has produced annualized returns of 12.5% and 11.8% over the five- and 10-year time frames, respectively.
XNTK’s performance puts it in the same conversation as QQQ and XLK, the popular tech ETFs mentioned above.
As of November 30, QQQ has generated annualized returns of 18.9% over the past five years and 17.4% over the past 10. Meanwhile, over the same time frame, XLK has produced annualized five- and 10-year returns of 23.5% and 19.9%, respectively.
While XNTK has slightly lagged XLK, its performance aligns with QQQ, which is widely perceived as one of the market’s top ETFs. Ultimately, all three tech-focused powerhouses have delivered phenomenal returns over the past decade.
What is XNTK’s Expense Ratio?
XNTK charges an expense ratio of 0.35%, which is reasonable. This means an investor in the fund will pay $35 annually on a $10,000 investment. While this is cheaper than the expense ratios of many other ETFs, it should be noted that both QQQ and XLK are cheaper, with expense ratios of 0.20% and 0.10%, respectively.
Is XNTK Stock a Buy, According to Analysts?
Turning to Wall Street, XNTK earns a Moderate Buy consensus rating based on 31 buys, six Holds, and zero Sell ratings assigned in the past three months. The average XNTK stock price target of $172.38 implies 5.4% upside potential.
Takeaway: XNTK is an Underrated ETF
XNTK is an underrated ETF that put up a performance for the ages in 2023, besting the more popular QQQ in the process. Going forward, I’m bullish on XNTK based on its strong long-term performance and its strong collection of highly-rated blue chip tech stocks.
The ETF has certainly already had quite a run. However, over the long term, it still looks promising as it gives investors exposure to themes that have plenty of growth potential, like semiconductors, artificial intelligence, and the cloud.
While XNTK is a worthwhile investment in its own right, it also looks like a good way for investors to gain some tech exposure that’s a bit different than what the likes of XLK and QQQ offer, making it a good complement to these funds as well.
