After A Sweet November, Apple ETFs Are Set For A Warm December

Apple (NASDAQ:AAPL) was on a tear in November, with a return of around 10% (as of Nov 28) (versus 3.9% gains in the S&P 500 and 5.2% of the Nasdaq). Anticipations for solid holiday season sales drove this strong momentum. Decent growth prospects, and impressive product launches have been driving the stock this year despite the ebb and flow of trade tensions.

Buoying this optimism, on Nov 20, President Trump said that he is mulling over the exemption of the U.S. tariffs on imports of China-made Apple products from China. Apple chief Tim Cook has reportedly sought relief for China-made Apple Watches, iPhone components and other consumer products from U.S. tariffs. Since Apple depends on China to get most of its iPhones manufactured, tariff news bodes well for this tech behemoth (read: Are Apple ETFs in for Trump Trade Ahead?).

Demand for AirPods Surging

A survey conducted by Piper Jaffray shows that Apple is the 'top-listed consumer brand for teens' this holiday season. Apple Watch devices and AirPods are likely to serve as great holiday gifts. In any case, Apple wearables have been seeing solid growth.

Apple’s AirPods could see a shortage because of their popularity in the holiday season, per Wedbush analyst Dan Ives. The analyst estimated 65 million AirPods shipment in 2019, which has the potential to reach 85-90 million units in 2020. Apple’s latest model, the $249 noise-cancelling AirPods Pro, is likely to be “a clear star of Black Friday and the holiday season.”

Nikkei reported on Wednesday that Apple’s manufacturers have been asked to double production of the AirPods Pro to 2 million units per month, as quoted on CNBC. Older versions of AirPods have undergone steep cuts on deal days.

Other research houses like Bernstein, Morgan Stanley (NYSE:MS) and Barclays (LON:BARC) have also been betting big on Apple’s wearables segment. “Huge AirPod growth” drove the company’s latest quarterly results too.

Demand for iPhone 11 has been strong if we go by Apple’s supplier Hon Hai Precision Industry Co.’s quarterly results. J.P. Morgan also expects Apple to sell 3 million more iPhones than expected in the final quarter of 2019. Rising expectations for a “big 5G iPhone upgrade cycle starting late next year” are making Apple stock a lucrative bet. J.P. Morgan expects Apple to unveil four handsets in September 2020, all 5G enabled(read: Should You At All Dump Apple ETFs Following Buffett?).

To tap the optimism, investors can play Apple-heavy ETFs as the basket approach reduces company-specific risks.

ETFs in Focus

Below we highlight five funds having Apple as the top or second firm with a double-digit allocation and sporting a Zacks Rank #1 (Strong Buy) with a Medium-risk outlook:

Select Sector SPDR Technology ETF XLK

This most-popular technology ETF has $24.9 billion in AUM and charges 13 basis points (bps) in fees per year from investors. AAPL occupies the second position and makes up for roughly 19.3% of assets (read: ETFs to Buy on Phase 1 of U.S.-China Trade Deal).

Vanguard Information Technology ETF (HN:VGT)

This fund also targets the broad tech sector with Apple as the top firm holding 17.4%. It has amassed $23.6 billion in its asset base and charges 10 bps in annual fees (read: 3-Year Scorecard of Trump Presidency: 5 ETFs Up At Least 100%).

MSCI Information Technology Index ETF (TSXV:FTEC)

With AUM of $2.9 billion, the product allocates 17.9% to Apple. The ETF has 0.08% in expense ratio.

iShares Dow Jones US Technology ETF IYW

This ETF provides investors exposure to the broad technology sector, charging investors 42 bps in annual fees. Here, Apple is the second firm, accounting for 17.1% allocation. The fund has AUM of $4.6 billion.

Invesco QQQ QQQ

This ETF provides exposure to the largest domestic and international non-financial companies listed on Nasdaq based on market capitalization, with Apple as the first firm, which accounts for 12.15% share in the basket. It has $83.3 billion in AUM and charges 20 bps in fees per year.

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