ABCDETF: Three Ways To Play Google's Alphabet Metamorphosis


Shares of Google Inc(NASDAQ:GOOG) (NASDAQ:GOOGL) surged 6.2 percent in Monday's after-hours session after the company announced a reorganization that will see the company separate its highly profitable Internet search and advertising businesses from less mature assets, including smart thermostats and self-driving cars.

As a result of the new corporate structure, Google will become part of a technology conglomerate of sorts known as Alphabet. Google CEO and co-founder Larry Page will be Alphabet's CEO. The company will retain its dual Nasdaq listings, where it trades under the tickers GOOG and GOOGL.

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"I am really excited to be running Alphabet as CEO with help from my capable partner, Sergey, as President," Page wrote in the company's official blog. "What is Alphabet? Alphabet is mostly a collection of companies. The largest of which, of course, is Google. This newer Google is a bit slimmed down, with the companies that are pretty far afield of our main Internet products contained in Alphabet instead.

Related Link: Why Google's New Alphabet Structure Is A 'Concrete Example' Of Innovation

The company's reorganization also means Alphabet will own all of Google's capital stock. Alphabet will oversee Google and a collection of other companies, including Google X, Calico, Life Sciences, Ventures and Capital.

Judging by Google's after-hours and pre-market performance, Wall Street likes the Alphabet idea and that could translate to some upside for Google, er, Alphabet-heavy exchange traded funds.


Nearly 50 ETFs hold shares of the company soon to be known as Alphabet, but it is Internet ETFs where Google/Alphabet holds truly dominant positions. Start with the First Trust Dow Jones Internet Index Fund (NYSE:FDN).

Google's class A and class C shares combine for over 11.1 percent of FDN's weight, in effect making Google the ETF's largest holding, though, Inc. (NASDAQ:AMZN), Facebook Inc(NASDAQ:FB) and Inc. (NASDAQ:PCLN) eachcommand larger portions of FDN's weight than either Google's class A or class C shares on an individual basis.

FDN's primary rival, the PowerShares NASDAQ Internet Portfolio (NASDAQ:PNQI), features Google as its second-largest holding at a weight of 9.6 percent. PNQI has lagged FDN this year due in part to the latter's exposure to some Chinese Internet names.

Investors have added almost $1.1 billion to FDN this year while pulling $73.5 million from PNQI. Another Alphabet ETF to consider is the SPDR Morgan Stanley Technology ETF (NYSE:MTK).

The SPDR Morgan Stanley Technology ETF allocates a combined 6.7 percent of its weight to Google class A and class C shares, putting the stocks in a near tie with Netflix, Inc. (NASDAQ:NFLX) for the honor of being MTK's largest holding.

MTK has added $10.3 million in assets since we highlighted the ETF on July 27. Up 5.7 percent year-to-date, MTK has offered better than double the returns of the S&P 500.

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