Buy the Dip: 3 ETFs That Have Taken a Beating in 2022

Three prominent TSX ETFs trades at bargain prices in 2022 because of their significant exposure to the slumping technology sector.

| More on:
exchange-traded funds

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

The entry of exchange-traded funds (ETFs) in the stock market was welcome news to risk-averse and passive investors. Besides simplifying the selection process, the asset class enable investors to spread the risks. However, ETFs aren’t risk-free because of these salient features. All ETFs carry risk-ratings from low and medium to high.

Among the stable performers amid today’s precarious market are BMO Equal Weight Banks Index ETF and iShares Core Conservative Balanced ETF Portfolio. You can stick to the pair for recurring income streams from dividends.

However, tech-heavy ETFs are taking a beating in 2022. TD Global Technology Leaders Index ETF (TSX:TEC), BMO NASDAQ 100 Equity Index ETF (TSX:ZNQ), and iShares S&P/TSX Capped Information Technology Index ETF (TSX:XIT) have mirrored the underperformance of TSX’s technology sector so far in 2022.

TEC is down 28.35%, while ZNQ is losing by 34.29%. Meanwhile, XIT is far worse with its 37.3% year-to-date loss. You can buy them on the dip before the eventual rebound of tech stocks or stay clear while the slump continues.

85% American

TD Asset Management is the portfolio adviser to TEC. This ETF tracks the performance of the Solactive Global Technology Leaders Index, which is comprised primarily of mid- to large-cap tech stocks. But in terms of geography, U.S. tech firms have 84.9% representation versus the 1.1% of Canadian firms.

However, regarding sector mix, the basket is not purely technology (71.4%). The fund also holds stocks from eight other sectors, including consumer services (8.3%), financial (5.8%), and consumer goods (5.7%). The top two holdings are Apple (14.75%) and Microsoft (12.03%). If you invest today, TEC trades at $22.11 per share.

NASDAQ only

ZNQ, through BMO Global Asset Management, provides exposure to non-financial equities in the United States. This ETF replicates the performance of a NASDAQ-listed companies index — specifically, 100 of the largest firms in the tech-heavy index. Like TEC, the basket includes stocks from other sectors.

However, the geographic allocation is 100% American. Apple and Microsoft are also the top two holdings out of a total of 103 stocks. In 3.01 years, ZNQ’s total return is 53.05% (15.2% CAGR). It trades at $49.57 today, or 25.85% lower than its peak of $66.85 on January 4, 2022.

100% Canadian   

The target exposure BlackRock’s ETF is only on Canadian tech firms. XIT replicates the performance of the S&P/TSX Capped Information Technology Index and aims to deliver long-term capital growth. As of May 17, 2022, application software companies (50.81%) have the most significant representation, followed by internet services & infrastructure (19.71%) and IT consulting & other services (18.44%).

Constellation Software and Shopify are the top two out of 26 holdings. XIT has done well in the last five years (+124.58%), but unfortunately, it could plunge some more from its bargain price of $32.46 today.

Risky choices

Technology stocks and tech-heavy ETFs like TEC, ZNQ, and XIT aren’t the best investment choices today. If you want to stay invested in this asset class, look for funds that pays oversized dividends and with zero exposure to the tech sector.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shopify. The Motley Fool recommends Apple, Constellation Software, and Microsoft.

More on Tech Stocks

Online shopping
Tech Stocks

Down 80% From Record Highs, Is Shopify Stock Undervalued Right Now?

Shopify is among the worst-performing stocks on the TSX in 2022. The selloff surrounding growth stocks has dragged Shopify lower…

Read more »

Hand arranging wood block stacking as step stair with arrow up.
Tech Stocks

Could Lightspeed (TSX:LSPD) Stock Hit $50 in 2022?

The significant selloff in Lightspeed stock seems unwarranted, especially as the company has multiple growth catalysts and is delivering robust…

Read more »

analyze data
Tech Stocks

Fantastically Cheap TSX Tech Stocks

Investors should benefit from buying cheap tech stocks that are growing their profits in this market correction.

Read more »

Wireless technology
Tech Stocks

2 Quality Growth Stocks Breathe Life Into the Tech Sector

The battered technology sector has been advancing lately thanks to two quality growth stocks with pricing powers.

Read more »

clock time
Tech Stocks

Now’s the Time to Load Up the TFSA With These 2 Top TSX Stocks

Here are two top TSX stocks that long-term growth investors may not want to give up on, especially at these…

Read more »

shopping online, e-commerce
Tech Stocks

Shopify (TSX:SHOP) Stock Recovers 30% From its 3-Year Lows: Should You Buy?

Shopify stock: Should you buy the dip or wait for more weakness?

Read more »

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Tech Stocks

What Market Correction? 2 High-Growth Tech Stocks That Are on the Rise

I don’t think it will be long before these two Canadian tech stocks are back to delivering market-crushing returns.

Read more »

grow dividends
Tech Stocks

Why Kinaxis (TSX:KXS) Stock Jumped 14% Last Week

Kinaxis Inc. (TSX:KXS) stock popped over the past week after adding yet another big company to its impressive stable.

Read more »