In this episode of ETF Spotlight, I talked with John Frank, QQQ equity product strategist at Invesco. We discussed the Invesco QQQ ETF (QQQ , which is based on the Nasdaq-100 Index.
The Nasdaq-100 index is made up of 100 largest non-financial companies listed on the Nasdaq. While most investors think of QQQ as a tech focused ETF, it actually is more of a large cap growth fund, holding many highly innovative and strong companies in other sectors too.
John explained how stocks are included and weighted in the index. We also discussed how modified cap weighting with two safeguards ensures that the index is well diversified.
Invesco QQQ is one of the top performing ETFs of the nine-year bull run; it significantly outperformed other large cap growth ETFs. We discussed what contributed to this outperformance.
Through its heavy weighting in technology, John added that QQQ provides exposure that delivered higher returns than sectors in other growth indexes.
Investors love the FAANGs, comprising Facebook (FB), Amazon (AMZN) , Apple (AAPL) , Netflix (NFLX ) and Google’s parent--Alphabet (GOOGL) for their stellar growth. FAANGs currently account for almost 40% of weighting in this portfolio.
Their soaring share prices have resulted in stretched valuations in some cases. The ETF is currently trading at ~20% premium to the S&P 500 Index, as a multiple of forward earnings.
As earnings growth is expected to slow down in the coming quarters, many market darlings included in the index would look much more expensive. Would that make them less attractive to some investors?
John pointed out that historically the Nasdaq-100 has traded at about 30% premium to the broader market and the current valuation actually looks attractive on a relative basis. Investors love these companies due to their phenomenal growth!
QQQ provides exposure to many companies developing and implementing disruptive technologies that are changing our world, like self-driving cars, artificial intelligence, cloud computing and blockchain.
John went over some of these trends. For example, not many investors know that Microsoft (MSFT) is developing technologies to help their clients implement blockchain.
He also highlighted that R&D spending by QQQ companies will ensure that they will stay on the leading edge of technology development and continue to grow in the coming years.
The average Nasdaq-100 company spends about double what the average company in some other major indexes spends on R&D annually. Find out more in the podcast!
If you want to learn more about this ETF and other Invesco ETFs, please visit www.invesco.com
And please visit the ETF section of zacks.com for more information on this and many other ETFs.
Finally, make sure to be on the lookout for the next edition of the ETF Spotlight! If you have any comments or questions, please email podcast@zacks.com
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>
Image: Bigstock
Here's Why This FAANG Powered ETF Can Keep Outperforming
In this episode of ETF Spotlight, I talked with John Frank, QQQ equity product strategist at Invesco. We discussed the Invesco QQQ ETF (QQQ , which is based on the Nasdaq-100 Index.
The Nasdaq-100 index is made up of 100 largest non-financial companies listed on the Nasdaq. While most investors think of QQQ as a tech focused ETF, it actually is more of a large cap growth fund, holding many highly innovative and strong companies in other sectors too.
John explained how stocks are included and weighted in the index. We also discussed how modified cap weighting with two safeguards ensures that the index is well diversified.
Invesco QQQ is one of the top performing ETFs of the nine-year bull run; it significantly outperformed other large cap growth ETFs. We discussed what contributed to this outperformance.
Through its heavy weighting in technology, John added that QQQ provides exposure that delivered higher returns than sectors in other growth indexes.
Investors love the FAANGs, comprising Facebook (FB), Amazon (AMZN) , Apple (AAPL) , Netflix (NFLX ) and Google’s parent--Alphabet (GOOGL) for their stellar growth. FAANGs currently account for almost 40% of weighting in this portfolio.
Their soaring share prices have resulted in stretched valuations in some cases. The ETF is currently trading at ~20% premium to the S&P 500 Index, as a multiple of forward earnings.
As earnings growth is expected to slow down in the coming quarters, many market darlings included in the index would look much more expensive. Would that make them less attractive to some investors?
John pointed out that historically the Nasdaq-100 has traded at about 30% premium to the broader market and the current valuation actually looks attractive on a relative basis. Investors love these companies due to their phenomenal growth!
QQQ provides exposure to many companies developing and implementing disruptive technologies that are changing our world, like self-driving cars, artificial intelligence, cloud computing and blockchain.
John went over some of these trends. For example, not many investors know that Microsoft (MSFT) is developing technologies to help their clients implement blockchain.
He also highlighted that R&D spending by QQQ companies will ensure that they will stay on the leading edge of technology development and continue to grow in the coming years.
The average Nasdaq-100 company spends about double what the average company in some other major indexes spends on R&D annually. Find out more in the podcast!
If you want to learn more about this ETF and other Invesco ETFs, please visit www.invesco.com
And please visit the ETF section of zacks.com for more information on this and many other ETFs.
Finally, make sure to be on the lookout for the next edition of the ETF Spotlight! If you have any comments or questions, please email podcast@zacks.com
Want key ETF info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing ETFs, each week. Get it free >>