Riding The Smartphone Wave

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Smartphone sales have been on a tear ever since Apple introduced the iPhone. With many competitors now offering similar products, demand seems to be rising as Tom at ETF Trends points out in “Accessing Smartphone Popularity With ETFs.”

Let’s take a look at MTK, an ETF that not only covers the major players but also some of the cellular service providers. Here’s a 2 year chart:

The long term trend has been clearly up, but more importantly for the use of trend tracking, the pullbacks have been modest. During several corrections in the past year, MTK came off its high by only -8.84% (I refer to this as MaxDD%), which happened on 1/29/10. If you used my recommended 10% sell stop for sector funds, you would have not been stopped out.

Before you get all excited and jump in, there are a couple of shortcomings you should be aware of. First, average daily volume is only $1.7 million dollars. But if you have a modest amount to deploy in this arena, this should not present a problem. Second, I checked, and the bid/ask spread is a hefty 4 cents.

That is a little pricey; however, if this ETF continues on a hot streak, it could be well worth your consideration.

Disclosure: We have no positions in MTK.

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