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ETFs for a Chip Rally

SMH managed to outperform IGW and XSD, but it is still slightly underperforming the S&P 500 with a decline of 1.3% so far in 2010.

Another way to play a rebound in the semiconductor sector is to gain exposure via international ETFs with large sector exposure. There are two country-specific ETFs that spring to mind.

The first is iShares MSCI Korea Index Fund (EWY). The fund's top holding is Samsung, which accounts for a hefty 18.1% of holdings.

In its last earnings report, Samsung noted that its chip business was a significant source of revenue growth for the company. More recently, the company announced that it would be investing $3.6 billion in a chip production plant in Austin, Texas, in a bullish gesture that future chip demand will stay strong.

Another international play on semiconductors is iShares MSCI Taiwan Index Fund (EWT).

This fund's top holding, accounting for 13.8% of assets, is Taiwan Semiconductor Manufacturing (TSM - Get Report).

In addition to TSM, the fund has several other tech-related companies outside of the specific semiconductor sector and information technology accounts for 60.8% of the assets in this ETF.

In sum, the best way to play a rally in the semiconductor sector, with a domestic slant, is by using XSD or IGW. For an international play on the rally, EWT or EWY are the best choices.

-- Written by Don Dion in Williamstown, Mass.
At the time of publication, Dion Money Management was not long any equities mentioned.

Don Dion is president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Mass., Dion Money Management manages assets for clients in 49 states and 11 countries. Dion is a licensed attorney in Massachusetts and Maine and has more than 25 years' experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.

Dion also is publisher of the Fidelity Independent Adviser family of newsletters, which provides to a broad range of investors his commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds. With more than 100,000 subscribers in the U.S. and 29 other countries, Fidelity Independent Adviser publishes six monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.
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EWY $53.41 0.00%
EWT $13.43 0.00%
INTC $34.46 0.00%
SMH $55.09 0.00%
TSM $22.45 0.00%


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