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Tech Stocks: Two Ways to Play Them

This post is part of a regular series written by ETF Trends editor Tom Lydon, special for CNBC.com.

Since the market’s low on March 9, it’s become increasingly apparent that technology is a standout sector. Now the markets are getting confirmation of the sector’s strength through a slew of earnings reports that are dusting analysts’ expectations:

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AP

- Technology-sector bellwether Intel reported better-than-expected quarterly profits

- Google announced a 27 percent increase in third-quarter profits, beating expectations; Google attributed the gains to more demand for e-commerce and online advertising

- IBM reported a 14 percent earnings increase year-over-year, beating expectations

On Monday, Apple and Texas Instruments will report earnings, while Microsoft is up on Friday. Cisco will announce its third-quarter results in the first week of November.

Technology has held investor interest for a multitude of reasons: Consumers need and love new technology and they insist on name brands, regardless of economic conditions; the Nasdaq 100 is outperforming other indexes year-to-date, up 43.5 percent; global semiconductor sales jumped 5 percent from July to August; and the falling price of laptops and the popularity of netbooks have generated new revenue for the tech sector.

Choosing a tech sector winner can be a daunting challenge. This is why exchange-traded funds (ETFs) are the ideal vehicle for getting total exposure and capitalizing on the momentum these companies share:

- Technology Select Sector SPDR: Apple, 7.8 percent; Cisco, 6.4 percent; Google, 4.8 percent; Intel, 4.8 percent; IBM, 8 percent; Microsoft, 9.7 percent

- iShares Dow Jones U.S. Technology: Apple, 9 percent; Cisco, 7.5 percent; Google, 6.5 percent; Intel, 6 percent; IBM, 8.8 percent; Microsoft, 11.3 percent

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Disclosures:

Tom Lydon’s clients own shares of XLK.

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Tom Lydon is the editor of ETF Trends and author of iMoney: Profitable ETF Strategies for Every Investor.

Disclaimer