Apple Microsoft In New High Ground; Are Biotechs Ready To Run?

Large-cap growth funds holding Apple ( AAPL ) and Microsoft ( MSFT ) are off to a solid start this year as they continue to stay ahead of the broader market.

[ibd-display-video id=3037819 width=50 float=left autostart=true] The top performer, based on its one-year return of 40.7% through Jan. 9, is iShares Edge MSCI USA Momentum Factor ( MTUM ). The $6.1 billion fund's 4.2% year-to-date gain puts it in third place based on that measure. The S&P 500 was up 3% as of Jan. 9, according to Morningstar Direct.

MTUM's top five holdings, which made up 23% of assets, were JPMorgan ( JPM ), Microsoft, Apple, Bank of America ( BAC ) and Boeing (BA). Apple, which soared 46% last year, broke out past a 176.34 flat-base entry on Friday. It first cleared the buy point Dec. 18 ahead of a pullback to the 50-day moving average .

Microsoft advanced 2% Friday on a price target upgrade from KeyBanc Capital Markets. Shares are at a record high.

PowerShares QQQ Trust (QQQ), which tracks the tech heavy Nasdaq 100 index, scored a one-year and YTD return of 34.1% and 4.4%, respectively. The 18-year-old fund, which counts Apple, Microsoft, Amazon, Facebook and Alphabet as its top five holdings, has amassed nearly $70 billion in assets.

Third place went to iShares Russell 2000 Top 200 Growth (IWY), which has gathered $975.2 million in assets since its September 2009 launch. While IWY held the same top five names as QQQ, it was less top-heavy. The top five accounted for 28% of IWY's total assets vs. 39% for QQQ.

All three ETFs have low expense ratios: 0.15% for MTUM, 0.20% for QQQ and IWY. They also earn five-star ratings from Morningstar, which indicates how well a fund's returns have compensated investors for the amount of risk it incurs. The ratings range from one to five stars with the best performers, based on risk-adjusted return relative to similar funds, receiving five stars.

The three funds are trading at all-time highs and are extended from ideal buy points. In fact, the other ETFs in the accompanying table are also at record highs - not too surprising given we're now in the ninth year of a bull market.

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So, let's take a look at an ETF that's not on this list nor in the big-cap category, but may be setting up a new base: iShares Nasdaq Biotech (IBB). The fund is shaping the right side of a shallow base with a potential buy point at 114.25. Shares advanced 13% from a June breakout from another shallow base to their Oct. 6 intraday high.

The $10.3 billion fund, which tracks the Nasdaq Biotechnology Index, will mark its 17th anniversary next month. Biotech represented the biggest sector weight at 82% of assets, pharmaceuticals 11%, life sciences tools and services 6%, with smaller health care-related positions making up the rest.

Its top five holdings as of Jan. 11 were Gilead Sciences (GILD), Celgene (CELG), Amgen (AMGN), Biogen (BIIB) and Regeneron Pharmaceuticals (REGN). The top five stocks accounted for nearly 37% of total assets. Most have outperformed the broader market so far this year: Gilead, Amgen and Biogen have gained 10%, 6% and 5%, respectively vs. the S&P 500's 4% return.

IBB's one-year return of 20.4% slightly lags the S&P 500's 24.1% gain. The ETF's average annual return over the past three years lags the benchmark index but leads the S&P 500 during the past five, 10 and 15 years. IBB carries a 0.47% expense ratio.

Friday's pick, PowerShares S&P 500 Low Volatility Portfolio (SPLV), remains in a buy zone from a Jan. 3 rebound off the 50-day line.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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