Thursday’s ETF To Watch: iShares Multimedia Networking Index Fund (IGN)

by on August 11, 2011 | ETFs Mentioned:

Fear is the name of the game on Wall Street as worries over growth and the quality of sovereign debt have sent markets reeling over the last few days. First the downgrade of U.S. debt by S&P hit the markets hard and now concerns are beginning to build over Europe’s second largest economy, France, as well. This is forcing many to reevaluate the ability of the euro zone to navigate through the current storm, causing many to abandon equities in the process. Yet despite this gloom, investors still have a few earnings reports to look forward to, potentially saving the market from the abyss if results from these corporate titans can satisfy investors. While earnings season is all but over, a few companies are still on tap to give their quarterly updates. One of the largest is Cisco Systems (CSCO) which reported after the bell last night.

Cisco, the San Jose-based tech giant, has been struggling as of late as pressure from competitors and changing market forces have caused the company’s stock to slump so far in 2011. In fact, the once impenetrable firm is now down over 32% on the year, and 43% in the past 52 weeks alone, suggesting that significant concerns are beginning to build over the health of the company. Despite this uncertainty and CSCO’s abysmal performance so far this year, the company manged to not disappoint investors in its latest earnings report. The company reported adjusted income of 40 cents a share on revenues of $11.2 billion, edging out consensus expectations which called for revenues of $11 billion and earnings of 38 cents per share [Ten iShares ETFs Every Investor Should Know].

While these numbers many not have been spectacular, especially when considering that the company only had profits of 22 cents per share when including nearly $1.8 billion in restructuring and other charges, the outlook for the firm’s new fiscal year did help to dispel most concerns. “As we start our next fiscal year, you will see a very focused, agile, lean and aggressive company, that is laser focused on helping our customers use intelligent networks to transform their businesses,” said CEO John Chambers in a statement. Thanks to this, shares of CSCO, which were down by close to 2.3% before the bell, soared after the earnings announcement, gaining close to 10% at one point before tapering off with a roughly 7.5% gain in after hours trading [see Tech ETFs In Focus: Highlighting Hyper-Targeted Options].

Thanks to this robust earnings report, investors should look for the iShares S&P North American Technology-Multimedia Networking Index Fund (IGN) to be in for a heavy volume trading day. The fund, which tracks the S&P North American Technology-Multimedia Networking Index, measures the performance of U.S. traded multimedia networking stocks, holding about 35 companies in total. The top individual holding goes to Cisco, at close to 10% of total assets suggesting that IGN’s return during Thursday trading will be heavily influenced by the performance of CSCO shares and the market reaction to their conference call. Furthermore, since CSCO is generally considered a leader in the space, the company’s solid outlook could help to boost expectations for the rest of the sector as well, potentially leading to a very solid start to Thursday trading for this corner of the technology world [see more holdings of IGN here].

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Disclosure: No positions at time of writing.