Thu, Dec 23, 2010, 3:04PM EST - U.S. Markets close in 56 mins.
NEW YORK (TheStreet) -- A large part of Warren Buffett's success as an investor has hinged on his ability to pick out companies which he considers to be sure things. To the famous investor, sure thing investments are typically companies which hail from boring industries, are easy to understand, and hold promise for long term growth.
Utilizing these criteria, the famous investor has been able to identify, purchase, and profit from companies such as Coca-Cola, Wells Fargo, and Burlington Northern Santa Fe Railroad. However, it has also caused the Oracle of Omaha to overlook other attractive regions of the market.
In examining the Berkshire Hathaway portfolio, consumer goods, energy, industrials, and the financial industry can all be pointed to as regions of the market which Buffett understands and likes. Meanwhile, aside from his headline-grabbing investment in the Chinese battery maker-turned-electric car manufacturer, BYD, the technology industry appears to be a sector which has been largely avoided by the investor.
Although we have seen substantial progress within various tech-related fields and watched the popularity of companies such as Apple and Google increase dramatically, these and other tech and internet-related names remain noticeable absentees from Buffett's legendary portfolio.
While avoiding this slice of the market may appeal to Buffett, in this case I do not urge investors to mimic the world famous investor.
Technology has become an essential component to our everyday lives. Thanks to the advent of smart phones, Facebook, and other technology advancements, it is now required that we stay connected with the world around us in order to perform efficiently in our increasingly fast-paced global business environment.
In the aftermath of the global economic meltdown, sectors related to technology have fared markedly well. According to a report from Bespoke, internet retail, computers, and internet software have been some of the top performing market slices in the period following the collapse of Lehman Brothers. Since September, 2008, these three market subgroups have gained 146%, 42%, and 31% respectively.
This is a trend which is sure to continue as we head into the foreseeable future. Investors looking to follow technology's growth picture should look to the First Trust Dow Jones Internet Index Fund .
This ETF tracks a well-diversified index comprised of 40 companies hailing from the tech and internet industries. Top positions include Google, Amazon, Priceline, and Netflix. By tracking a combination of large, industry leaders and attractive momentum players, investors holding FDN will benefit from long term stability as well as strong upside potential.
Year to date, using FDN to track technology has paid off. The fund has gained nearly 40%, handedly outperforming other tech-heavy ETFs such as the PowerShares QQQ . Since the start of 2010, QQQQ has jumped 21%.
Although technology remains absent from Buffett's list of sure things, I would not advise investors to write this industry off as we head into the New Year. FDN is one tool which can be used to position your portfolio for the sector's increasing influence.
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