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Summary A concise fund consisting of 24 companies providing media focused hardware, software and security. Covers a broad spectrum of media services for retail, commercial and government demands. Although classified as a ‘cyclically sensitive’, IT seems to have become a ‘consumer necessity’. One might consider the date ‘May 24, 1844’ as ancient history and of no particular significance. However, it is a rare thing in the study of world history when a precise date may be pinpointed as the dawning of a new era. ” What hath God wrought? ” was the first telegram message , transmitted from Washington, D.C. to Baltimore using a Morse/Vail telegraph system. To be sure, it wasn’t the first use of the telegraph but was the first of what would set a standard. More importantly, the message itself wasn’t something practical or utilitarian. It was an expression of emotion and awe. From that day on, long distance communication would become a tool of the masses, a means to disseminate culture, art, events, news and ideas. Naturally, right on the heels of this innovation was investment capital. It was a pattern that would be transmitted down through the decades. The objective of the iShares North American Tech-Multimedia Networking ETF (NYSEARCA: IGN ) is to “… track the investment results of an index composed of North American equities in multimedia and networking technology …” As noted, the fund focuses on North American companies. Technically, the companies of the fund are classified as members of the ” Information Technology ” sector or simply ‘ IT ‘ sector for short. This is important since IT is classified as cyclically sensitive , that is to say consumers and business will spend less during economic downturns. Morningstar classifies ‘ Communication Services ‘ and ‘ Technology ‘ separately and as ‘ Sensitive Super Sector ‘ components; i.e., in theory they will rise and fall with the economic tide. Now, with the Asia-Pacific region in the midst of a ringing economic contraction and although Europe is finally showing signs of recovery, it still might be some time yet before the European economies are generating self-sustainable growth. Lastly, many South American economies, too dependent on commodity exports are experiencing recession as well as inflation . Even though the fund restricts its investments to North America, in a global economy, regional recessions have global consequences. However, by the same token, the investor must ask whether the IT sector of today is the same IT sector of a decade or more ago, in the time which classified it. Even as recently as the great recession the IT market has drastically changed. In particular, before the evolution of Facebook (NASDAQ: FB ) , Twitter (NYSE: TWTR ), Amazon Prime Video (NASDAQ: AMZN ), Hulu, Netflix (NASDAQ: NFLX ) or Apple TV (NASDAQ: AAPL ), streaming news, sports, and shopping, not to mention Uber (Pending: UBER ) or Airbnb, GPS and just simple too many apps to list. Today, a consumer without a mobile device is at a distinct disadvantage. For example, a mobile device is as important to a student today as was a ‘laptop’ just ten years ago! The point of the matter being that Information Technology now goes well beyond consumer discretionary spending. It has evolved into a near necessity. Personalized mobile network accessibility has been a cultural sea change in our society in which providing secure network conduits critical to consumers . (click to enlarge) (Data From BlackRock) iShares North American Tech-Multimedia Networking ETF ( IGN ) is small but includes major league hitters like Cisco (NASDAQ: CSCO ), and Juniper (NYSE: JNPR ). The table below highlights a few companies. It should be noted that although the fund concentrates on North American companies, many of the fund’s holdings are global corporations. Also, the ten listed companies in the table are not by weightings, but rather demonstrates the range of core IT services provided in order to give the investor an overview of the range of the fund’s network services composition. Company Name (Symbol) Services Provided % Institutionally Owned Appx Market Cap (millions) dividend Motorola Solutions (NYSE: MSI ) Communications Infrastructure; devices, software, accessories 89.92% $14286.00 1.97% Palo Alto Networks (NYSE: PANW ) Enterprise Security Platform; Cyber defense 82.24% $14841.00 0.00% Qualcomm (NASDAQ: QCOM ) Manufacture devices, integrated circuits for different platforms; e.g. CDMA, Frequency Division Multiple Access, and other radio systems 82.43% $86934.00 3.47% F5 Networks (NASDAQ: FFIV ) Full proxy software (TMOS) to provide seamless cloud data center cross platform deployments N/A $8502.00 0.00% Arris Group (NASDAQ: ARRS ) Entertainment/Communication solutions for media; IP Data and voice; IPTV digital video; both commercial and retail services N/A $4075.00 0.00% Echostar (NASDAQ: SATS ) Provides satellite services for video, broadband, set top boxes 91.80% $4033.00 0.00% Polycom (NASDAQ: PLCM ) Voice, video, content management/sharing, cloud delivered solutions for conferencing, healthcare, education and manufacturing N/A $1395.00 0.00% Lumentum (NASDAQ: LITE ) Optical and Photonic products; commercial and industrial lasers, data communications, telecom networking solutions 0.00% $864.00 0.00% (Information from multiple sources) As the table above demonstrates, these holding cover the entire spectrum of the industry, from the mega sized Cisco Systems with $131.49 billion market cap down to the relative small market caps the such as Adtran (NASDAQ: ADTN ) with a market cap of $757.00 million. The fund does have regular distributions, however, most of those distributions emanate from the larger companies. Further, according to iShares, although the fund was incepted in July of 2001, but it did not distribute a dividend until September of 2007 (click to enlarge) A word about the index: It is one of S&P benchmark indices “… that represents U.S. traded securities classified under the GICS® [ Global Industry Classification Standard ] communications equipment sub-industry. ..” The fund has net assets totaling $143,128,463.00 and trades on the NYSE-Arca and has 3.850 million shares outstanding with a 20 day average volume of about 3,896 ETF shares. The expense ratio is 0.48%, just a bit above the industry average 0.44%. The fund is marginable and with open option interest and is trading nearly at par with its underlying NAV. The fund’s recent P/E ratio is 20.17, and its price is about 2.78 times its book value. The fund is rather volatile with a Beta of about 1.52 times the market and a price standard deviation of 14.87% either side of the norm. The TTM yield is 0.63% and a forward looking distribution yield of 0.42%. Lastly, its returns are summed up in the chart below: Type of Return 1 Year 3 Year 5 Year 10 Year Inception 7/10/2001 Total Return 6.06% 13.18% 8.31% 2.44% 0.43% Market Shares 6.07% 13.17% 8.31% 2.43% 0.43% S&P Benchmark 6.53% 13.61% 8.63% 2.92% 0.88% The methods of access to communication, even as recently as five to ten years ago, made it imprudent for providers to invest it infrastructure upgrades in those early days of ‘Wi-Fi’ and ‘Hot-Spots’. The retail consumer’s equipment was less far sophisticated: a cell phone, laptop, desktop and television with a ‘set-top box’. Also, with contracts and ‘package plans’, price competition was less dynamic. Lastly, and most importantly, network security was of far less concern than anyone might have imagined. Today, network retail consumers are ‘living on the fly’ with ‘intelligent’ mobile devices, utilizing once wasted time profitably, to manage finances, catch up on favorite programming or music, last minute shopping, seeking employment opportunities, conducting business, monitoring health or sports activities, sharing thoughts, news, photos, gaming; simply an incomprehensible number of conveniences held in the palm of one’s hand. Mobile networking has become an integral part of advanced economy culture. Hence, the tide may have turned for access providers in such a way so that it is now critical to keep up with capital-expenditures to maintain or compete for market share, perhaps even more so during cyclical downturns. To be sure, there is no shortage of network technology funds, however the iShares North American Tech-Multimedia Networking ETF with respectable returns and focus on multimedia might prove far less cyclical than its classification implies. Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More…) I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. Additional disclosure: CFDs, spread betting and FX can result in losses exceeding your initial deposit. They are not suitable for everyone, so please ensure you understand the risks. Seek independent financial advice if necessary. Nothing in this article should be considered a personal recommendation. It does not account for your personal circumstances or appetite for risk. Scalper1 News
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