FDN) to higher ground. At nearly 10% of assets, Google is the No. 1 holdng in FDN. It is followed by Amazon ( AMZN), Ebay ( EBAY), Yahoo ( YHOO) and Juniper Networks ( JNPR), all of whom suffered this year. In fact, only three of the top 10 holdings are up this year: Akamai ( AKAM), Netflix ( NFLX) and Salesforce.com ( CRM) (CRM). Although rare this year, such impressive gains have helped FDN outperform broader technology ETFs such as the PowerShares QQQ ( QQQQ). Salesforce.com is the laggard of the three, with a gain of more than 20%. Akamai's more than 70% return is middling, while Netflix delivered a return in excess of 100% in 2010, an impressive (and much needed) boost to the portfolio. AA) reported better-than-expected results and the market rallied strongly on Tuesday. Those earnings only beat estimates by a penny and those estimates fell 2 cents in the past week, meaning one week ago they would have missed earnings. Still, an upbeat forecast plus low investor expectations combined to lift shares. Google earnings estimates for this quarter have increased over the past three months, but they're down slightly over the past two months. The company had stumbled in China and although it lost a competitive edge with Baidu ( BIDU), Chinese regulators renewed its Internet license this past week.
With the Chinese situation at least neutralized for now, investors will focus on the company's earnings and forecast for the rest of the year. Advertising remains the bread-and-butter that drives earnings, and it will be interesting to see how the quarter went. I'm optimistic about their earnings, but given the slide in retail activity in May, one area of concern is the click through rates on Google ads. Shares of Google have been especially weak in the past few months. The 50-day moving average crossed below the 200-day moving average in May, a bearish omen that foretold the continued slide in Google shares. But since July 6, when Google bottomed around $436 per share, GOOG has appreciated by nearly 13%. Google traded above its 50-day moving average yesterday, a first since April. Over the same period, FDN is up 10%. FDN also moved above its 50-day moving average yesterday, but unlike Google and much of the stock market, its 50-day moving average never crossed below its 200-day moving average this year, a sign of the fund's strength. For investors who prefer a broader technology play to an Internet heavy ETF, iShares Dow Jones U.S. Technology ( IYW) has 6.2% in GOOG, with Apple ( AAPL), Microsoft ( MSFT) , IBM ( IBM) and Cisco ( CSCO) carrying relatively heavier weightings. Technology Select SPDR ( XLK) has similar blue chip technology holdings, with Google at 5.4% of assets. However, XLK has 6.9% in AT&T ( T) and 3.5% in Verizon ( VZ). Investors who do not want telecom exposure in their tech fund should stick with IYW. Finally, one should note the PowerShares QQQ. It holds 4.3% in GOOG, but is overweight in Apple to the tune of 19.5% assets. The latter company reports next Tuesday and investors looking for a broad tech rally and a bullish report from Apple may prefer this ETF. -- Written by Don Dion in Williamstown, Mass.
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