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Is Direxion NASDAQ100 Equal Weighted Index Shares (QQQE) a Strong ETF Right Now?
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A smart beta exchange traded fund, the Direxion NASDAQ100 Equal Weighted Index Shares (QQQE - Free Report) debuted on 03/21/2012, and offers broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by Direxion, QQQE has amassed assets over $759.43 million, making it one of the average sized ETFs in the Style Box - Large Cap Growth. This particular fund, before fees and expenses, seeks to match the performance of the NASDAQ-100 Equal Weighted Index.
The NASDAQ-100 Equal Weighted Index consists of companies in the NASDAQ-100 Index but each of the securities is initially set at a weight of 1.00% of the Index. The NASDAQ-100 Index includes 100 of the largest non-financial securities listed on NASDAQ based on capitalization.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for QQQE are 0.35%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.75%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 42% of the portfolio. Healthcare and Consumer Discretionary round out the top three.
Taking into account individual holdings, Atlassian Corp Plc (TEAM - Free Report) accounts for about 1.29% of the fund's total assets, followed by Constellation Energy Corp (CEG - Free Report) and Mercadolibre Inc Usd 0.001 (MELI - Free Report) .
The top 10 holdings account for about 11.73% of total assets under management.
Performance and Risk
So far this year, QQQE has lost about -21.01%, and is down about -21.52% in the last one year (as of 11/15/2022). During this past 52-week period, the fund has traded between $58.71 and $90.09.
The ETF has a beta of 1.04 and standard deviation of 27.84% for the trailing three-year period, making it a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.
Alternatives
Direxion NASDAQ100 Equal Weighted Index Shares is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Growth ETF (VUG - Free Report) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ - Free Report) tracks NASDAQ-100 Index. Vanguard Growth ETF has $70.24 billion in assets, Invesco QQQ has $157.11 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Growth.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Is Direxion NASDAQ100 Equal Weighted Index Shares (QQQE) a Strong ETF Right Now?
A smart beta exchange traded fund, the Direxion NASDAQ100 Equal Weighted Index Shares (QQQE - Free Report) debuted on 03/21/2012, and offers broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
Products that are based on market cap weighted indexes, which are strategies designed to reflect a specific market segment or the market as a whole, have traditionally dominated the ETF industry.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Managed by Direxion, QQQE has amassed assets over $759.43 million, making it one of the average sized ETFs in the Style Box - Large Cap Growth. This particular fund, before fees and expenses, seeks to match the performance of the NASDAQ-100 Equal Weighted Index.
The NASDAQ-100 Equal Weighted Index consists of companies in the NASDAQ-100 Index but each of the securities is initially set at a weight of 1.00% of the Index. The NASDAQ-100 Index includes 100 of the largest non-financial securities listed on NASDAQ based on capitalization.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for QQQE are 0.35%, which makes it on par with most peer products in the space.
It's 12-month trailing dividend yield comes in at 0.75%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 42% of the portfolio. Healthcare and Consumer Discretionary round out the top three.
Taking into account individual holdings, Atlassian Corp Plc (TEAM - Free Report) accounts for about 1.29% of the fund's total assets, followed by Constellation Energy Corp (CEG - Free Report) and Mercadolibre Inc Usd 0.001 (MELI - Free Report) .
The top 10 holdings account for about 11.73% of total assets under management.
Performance and Risk
So far this year, QQQE has lost about -21.01%, and is down about -21.52% in the last one year (as of 11/15/2022). During this past 52-week period, the fund has traded between $58.71 and $90.09.
The ETF has a beta of 1.04 and standard deviation of 27.84% for the trailing three-year period, making it a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.
Alternatives
Direxion NASDAQ100 Equal Weighted Index Shares is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Growth ETF (VUG - Free Report) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ - Free Report) tracks NASDAQ-100 Index. Vanguard Growth ETF has $70.24 billion in assets, Invesco QQQ has $157.11 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Growth.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.