3 Niche Technology ETFs For NASDAQ 5000

The NASDAQ this week closed above the 5,000 level for the third time in history and is one big day away from hitting the highest level ever for the index. The rally has been fueled by a big move in Apple Inc. AAPL, but the top performers in the index over the last month are a plethora of relatively unknown names to most retail investors.

With that being said, it is time to look at some of the niche ETFs within the technology sector as investment opportunities. For example, the PowerShares QQQ Trust, Series 1 (ETF) QQQ, which is heavily weighted in Apple, is up 21 percent over the last 12 months. There is a trio of niche ETFs that have greatly underperformed the broader index, and it may be time to start nibbling.

First Trust Dow Jones Internet Index ETF

The First Trust DJ Internet Index Fund (ETF) FDN consists of 42 Internet-related companies that generate at least 50 percent of their sales/revenue from the Internet.

The top individual holdings include:

• Amazon.com, Inc. AMZN at 8.2 percent
• Facebook Inc FB with a 7.8 percent holding
• Priceline Group Inc PCLN at 5.4 percent

The ETF is up 4 percent over the last 12 months, but a recent breakout to a new all-time level was a bullish signal for FDN.

If the ETF can hold $65.79 in the next week, it would be a confirmation of the breakout. The expense ratio is 0.57 percent.

Related Link: 2 Internet ETFs Flexing Their Muscles

First Trust ISE Cloud Computing Index ETF

The First Trust Exchange-Traded Fund II SKYY is made up of 39 companies that are involved in the cloud-computing industry. To be included, the company must be actively involved in cloud-computing industry and have a market cap of at least $100 million.

The top individual holdings include:

• Netflix, Inc. NFLX at 4.4 percent
• Brightcove Inc BCOV making up 4 percent of the ETF
• Amazon.com coming in at 3.9 percent

The ETF is up 7 percent over the last 12 months and also hit a new all-time high this week. The support level to watch is $29.46, the high from late 2014. The ETF has an expense ratio of 0.60 percent.

Global X Social Media Index ETF

The Global X Funds SOCL tracks the largest publicly-traded, social media companies around the word, with 50 percent of its holdings in the United States and 28 percent based in China.

The top individual holdings include:

• LinkedIn Corp LNKD with a 14 percent holding
• Tencent Holdings Ltd at 12 percent
• Facebook making up 10 percent of the ETF

The ETF is down 16 percent over the last 12 months, as many of its international holdings have struggled. Unlike the prior two ETFs, SOCL trades well below its 52-week high; however, it has been forming a new uptrend in the last month. The ETF has an expense ratio of 0.65 percent.

If the NASDAQ rally continues, it will more than likely bring all sectors along with it, and the above niche ETFs could be a major beneficiary. Not only do they offer upside potential, they will also add diversification to a typical equity portfolio.