Image: Bigstock

The technology sector has suffered losses over the past week, following the Fed’s latest FOMC meeting. As the Federal Reserve turned more hawkish and expectations for higher interest rates rose, investors rotated out of the high-growth technology sector.

The beaten-down prices could be viewed as solid entry points. We have highlighted five ETFs that have been in red over the past week but have a solid upside potential given the encouraging fundamentals. These include Global X Blockchain ETF (BKCH - Free Report), VanEck Vectors Digital Transformation ETF (DAPP - Free Report), Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ - Free Report), Invesco DWA Technology Momentum ETF (PTF - Free Report) and WisdomTree Cloud Computing Fund (WCLD - Free Report).

The Federal Reserve signaled a more aggressive unwinding of its pandemic-era monthly bond-buying, setting the stage for three interest rates hikes in 2022 to fight inflation. The move has led to a sell-off in the sector. Surging inflation and the rapid spread of the Omicron COVID-19 variant added to the chaos. This is because the technology stocks rely on easy borrowing for superior growth and their valuations depend heavily on future earnings. Rise in yields lower the present value of companies’ future earnings.

However, the sector outlook remains solid given the global digital shift that has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence, machine learning, digital communication and 5G technology should continue to drive the sector higher.

In a tight policy era, technology seems one of the safest sectors as most companies are sitting on a huge cash pile. The cash reserves will ensure that these companies are not plagued by any financial trouble, even in a rising interest rate environment.

ETFs to Buy

Global X Blockchain ETF (BKCH) – Down 10.5%

Global X Blockchain ETF seeks to invest in companies positioned to benefit from the increased adoption of blockchain technology, including companies in digital asset mining, blockchain & digital asset transactions, blockchain applications, blockchain & digital asset hardware, and blockchain & digital asset integration. Global X Blockchain ETF holds 25 stocks in its basket with double-digit allocation to the top three firms.

Global X Blockchain ETF has gathered $108.4 million in its asset base and trades in an average daily volume of 173,000 shares. It charges 50 bps in annual fees.

VanEck Vectors Digital Transformation ETF (DAPP) – Down 9.5%

VanEck Vectors Digital Transformation ETF aims to offer exposure to the companies that are at the forefront of the digital asset transformation, such as digital asset exchanges, payment gateways, digital asset mining operations, software services, equipment and technology or services to the digital asset operations, digital asset infrastructure businesses or companies facilitating commerce with the use of digital assets. VanEck Vectors Digital Transformation ETF tracks the MVIS Global Digital Assets Equity Index and holds 29 securities in its basket.

VanEck Vectors Digital Transformation ETF charges 50 bps in annual fees and trades in an average daily volume of 68,000. DAPP has accumulated $51.5 million in its asset base since its debut in April.

Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF (RIGZ) – Down 8.4%

Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF is an actively managed ETF focused on the cryptocurrency mining industry, holding 18 stocks in its basket.

Viridi Cleaner Energy Crypto-Mining & Semiconductor ETF has newly debuted in the space and attracted $17.6 million in its asset base in just a month. It charges 90 bps in annual fees and trades in an average daily volume of 22,000 shares.

Invesco DWA Technology Momentum ETF (PTF) – Down 6.8%

Invesco DWA Technology Momentum ETF follows the Dorsey Wright Technology Technical Leaders Index, and provides exposure to 37 companies that are showing relative strength (momentum).

Invesco DWA Technology Momentum ETF is relatively illiquid and unpopular with AUM of $377.9 million and an average daily volume of 21,000 shares. The fund charges 60 bps in annual fees and has a Zacks ETF Rank #2 (Buy) with a High risk outlook.

WisdomTree Cloud Computing Fund (WCLD) – Down 6.3%

WisdomTree Cloud Computing Fund offers exposure to emerging and fast-growing U.S.-listed companies (including ADRs) that are primarily focused on cloud software and services, and follows the BVP Nasdaq Emerging Cloud Index. It holds 58 stocks in its basket and charges investors 45 bps in fees per year.

WisdomTree Cloud Computing Fund has amassed $1.2 billion in its asset base and trades in an average daily volume of 325,000 shares. It has a Zacks ETF Rank #2.