Technology stocks have started this year on a solid note, with the NASDAQ index up 4.05% so far in 2015, compared with 1.72% for the broader S&P 500 index. Some of the big names in the industry including Apple, Amazon and Cisco have delivered better than expected results and provided upbeat guidance, leading to stock gains. I expect this trend to continue in 2015 as there are many reasons to be bullish on the sector now.

Capital Expenditure Expected to Rise

In the recent past, companies held back on capital spending mainly due to economic and regulatory uncertainties. Now with the economy picking up steam and mid-term elections behind us, capital expenditure is expected to rise as the companies will have to transform themselves to meet the needs of their customers.

Huge Piles of Cash on Balance Sheets

Most tech companies, specially the mature ones, have huge piles of cash on their balance sheets and have been returning a lot to their shareholders via dividends and repurchases. Apple itself has $178 billion in cash and overall the tech sector holds more than half of the total US corporate cash. So I expected increase in dividend and repurchases in the coming months.
Also, with so much cash available to them, they will be less vulnerable to the rise in interest rates.

Key Emerging Trends Create Opportunities

The world is becoming increasingly digital and the role of technology in our daily lives continues to grow. Key emerging trends in the space such as cloud, mobility, big data, security, collaboration and the Internet of Things have created great opportunities for many tech companies.

Growth Sectors Likely to Outperform

For the last couple of years, defensive sectors like Utilities and Healthcare have outperformed the broader markets with now with the economic recovery gaining pace, investors are likely to focus on sectors economically sensitive with higher growth potential, which typically do well in maturing economic cycle.

In this scenario, investors should look at a couple top ranked technology ETFs that are discussed in the short video below:

(Running length 00:04:31)