The Next Gen NASDAQ ETF To Position Your Portfolio For A Post-Vaccine World
Investing.com | Nov 24, 2020 03:22
Positive vaccine news in recent weeks has boosted the appeal of cyclical stocks likely to see shares run up in a post-vaccine world. Sectors set to profit like energy, transportation, travel and leisure are picking up momentum, while tech shares—the main beneficiaries of the stay-at-home environment—have lost some luster.
Given that this sector rotation in equity markets is on track to continue, we'll cover an exchange-traded fund (ETF) set to gain from the rotation:
NASDAQ 100 Index Post-Coronavirus
The NASDAQ 100 index comprises the 100 largest US and non-US-based non-financial companies listed in the NASDAQ Stock Exchange based on market cap. Investors also refer to it as the triple Q's or simply QQQ, the ticker for the ETF that tracks the index.
Home to the mega-cap tech names driving the bull market of the past decade, NASDAQ 100 has climbed over 40% year-to-date. Since the 52-week low hit Mar. 23, the index is up over 65%. However, since Sept. 2, the NASDAQ 100 has declined about 5%. Although that loss is not dramatic compared to run up in 2020, it is hard to know where the index goes from here.
The stock market is future-focused, so correctly anticipating what instruments will profit ahead, can be rewarding. Alexander F. Wagner's research article "What the stock market tells us about the post-COVID-19 world," supports this point:
"The stock market can be a powerful tool for society. It provides a unique view of the expected future of a company and the economy. That is because the value of a firm derives from all future expected cash flows, discounted to the present to adjust for time and uncertainty."
Diversification across sectors and indices can add protection, especially at a time when we can expect increased volatility levels in tech shares.
In recent weeks, we discussed several funds that could appeal to a range of portfolios. They included small-caps with international exposure, bond funds, and airlines, among others. Now, we expand that discussion with another ETF:
h2 Invesco NASDAQ Next Gen 100 ETF/h2- Current Price: $28.40
- 52 Week Range: $24.67-$28.39
- Expense Ratio: 0.15%
The Invesco NASDAQ Next Gen 100 ETF (NASDAQ:QQQJ) provides exposure to the 101st to the 200th non-financial largest companies on the NASDAQ. The fund started trading in October 2020 and has assets under management of around $220.
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QQQJ, which has 96 holdings, tracks the NASDAQ Next Generation 100 Index. The index, which is rebalanced quarterly and reconstituted annually, comprises securities of the next generation of NASDAQ-listed non-financial companies. Many of these businesses are mid-cap stocks.
As far as industries are concerned, funds are distributed among Information Technologies (46.59%), Health Care (18.03%), Communication Services (11.05%), Consumer Discretionary (10.76%), Industrials (9.65%) and others.
20% of the holdings are in the top ten stocks. Currently, the first five businesses in the fund are:
- Trade Desk (NASDAQ:TTD): Ventura, California-based demand-side digital-advertising platform; up 223% YTD with a market cap of $38.9 billion
- Marvell Technology (NASDAQ:MRVL): Bermuda-domiciled chip firm; up 67% YTD with a market cap of $29.6 billion
- Roku (NASDAQ:ROKU): San Jose, California-headquartered streaming content platform; up 103% YTD with a market cap of $34.4 billion
- Okta (NASDAQ:OKTA): San Francisco, California-headquartered identity management service; up 95% YTD with a market cap of $28.9 billion
- Atlassian (NASDAQ:TEAM): London, UK- registered (but Sydney, Australia-based) software development and collaboration tools platform; up 75% YTD with a market cap of $51.9 billion,
Positioning portfolios for a post-vaccine world will be on many investors' minds in the coming weeks. We believe companies in the QQQJ, as well as the ETF, deserve attention. Since it is a new fund, there are not enough valuation metrics and data for detailed analysis. Yet market participants are likely to hear the names of many of these businesses in the coming quarters as they grow revenue, earnings and market caps.
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