In a good year for technology stocks, IBD’s software sector has climbed nearly 30%. IShares North America Tech-Software ( IGV ) ETF has been a vehicle for that trade.
The exchange traded fund is up about 38% in 2017 and trading near all-time highs. Its performance has earned the fund a spot on IBD’s ETF Leaders screen, and it’s the only pure-software ETF on this month’s list.
As happens with other leading ETFs, the success of many of its top components have carried the fund to a market-beating performance. In the case of iShares North America Tech-Software, solid advances for Microsoft ( MSFT ), Activision Blizzard ( ATVI ), Intuit ( INTU ), Red Hat ( RHT ) and several others have combined into an attractive basket of software stocks.
Microsoft – the largest holding, with a nearly 9% weighting – is near an all-time high as it stretches a fine advance of 33% that began a year ago. That’s when the stock broke out of a base on a bullish earnings report.
Activision climbed as much as 46% from a breakout on earnings Feb. 10. Red Hat is up about 50% from a February breakout. ServiceNow (NOW) has risen roughly 30% from breakouts in January and April.
IShares North America Tech-Software includes companies in video game, medical, database, security, financial and other software segments. According to the iShares website, the ETF is about half invested in what it calls application software, about one-third in systems software and 14% in home entertainment.
After its powerful run, is the ETF at risk of exhausting itself?
The software industry is largely cyclical. Continued expansion of the U.S. economy, improving corporate profits and capital spending, plus low unemployment make for a good foundation for growth.
But the software sector certainly follows pullbacks and corrections in the general market, and growth stocks tend to fall more than the main indexes during weak markets.
A positive trend is that few of the 57 stocks in iShares North…