Vanguard Information Technology (AMEX: VGT, $60.03)

Growth vs. Value. Though some downplay such distinctions, many investors at least broadly classify themselves as one type or the other: some of us look for bargain-priced stocks trading at below-average multiples, while others are willing to pay a premium price for a company on the move.

But occasionally the two sides can still reach the same conclusion. Take Motorola (NYSE: MOT, $17.90), for example. The wireless equipment giant has delivered impressive annual sales growth of +17% over the past three years, while its earnings have shot up more than +50% per year. Yet, after tumbling in recent months, the company now has a market cap ($42 billion) below last year's sales ($43 billion), and the shares are trading at just 13 times trailing cash flows — about half the industry average.

And along with other tech bellwethers like Microsoft, Yahoo and eBay, Motorola happens to be one of the largest holdings of the Vanguard Information Technology Fund.

Now, we're not suggesting that value hunters begin piling into the tech sector unrestrained. However, on a relative basis, technology stocks are more favorably valued than many other corners of the market. For the most part, large, blue-chip tech stocks have been out of favor for the past several years, and while the Dow Jones Industrials and S&P 500 have both raced ahead to new record highs, the Nasdaq has lagged and is still about -50% below where it peaked back in 2000.

Of course, the precise timing and duration of market cycles is tough to predict, but we believe the tech sector could emerge as a leader going forward. And when that shift occurs, VGT shareholders should be better positioned than most to reap the rewards.

First, the fund is far more diversified than many of its peers, tracking an index of around 400 stocks that comprise the entire tech spectrum — from semiconductor manufacturers to data processing firms. As such, it captures a broader swathe of what the tech sector has to offer. However, by no means is the portfolio watered down. In fact, roughly half of the fund's assets are concentrated in the top ten holdings — including stalwarts like Dell and Qualcomm that are just now beginning to rebound.

Over the past year, VGT has delivered solid gains of +37%, outpacing two-thirds of its peer group. Meanwhile, the fund's annualized three-year return of +12.3% has accomplished the same feat. And thanks to its rock-bottom expense ratio of 0.25% (among the lowest in its category), VGT should remain near the top of the leaderboard in the coming years.

Like any sector fund, VGT is narrowly-focused and thus vulnerable to occasional downturns in tech stocks. However, its broadly diversified portfolio has helped clamp down on volatility, and a focus on some of the most established (and undervalued) names in the sector bodes well.

All things considered, VGT is likely to remain quite volatile, but we expect to see more ups than downs. Therefore, we plan to add the fund, which has earned an impressive ETF Composite Score of 29 (B+), to our "Sector Trading" Portfolio on Monday, July 16th.