The Nasdaq With Just The Tech
The PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ: QQQ) is the exchange-traded fund investors primarily turn to when looking for exposure to the widely followed NASDAQ-100 Index (NDX).
Investors usually seek such exposure because they want exposure to technology. Though down from its highest allocations to tech stocks at the apex of the 2000 tech bubble, the NASDAQ-100 still devotes over 56 percent of its weight to tech names. However, that also means it is not a pure play tech benchmark, as consumer discretionary and healthcare (mostly biotech) names combine for a third of the index's weight.
All About That Tech
Investors insisting on technology sector purity with their Nasdaq ETFs can turn to the First Trust NASDAQ-100-Technology Sector Ix Fd (NASDAQ: QTEC). QTEC, which was one of just 25 ETFs to hit all-time highs last Friday, follows the NASDAQ-100 Technology Sector Index. That index is essentially the all tech offshoot of the traditional NASDAQ-100.
What that means is that investors should not expect to find biotech stocks in QTEC nor should they expect to find shares of Amazon.com, Inc. (NASDAQ: AMZN), one of QQQ's largest holdings, because it is classified as a consumer discretionary name, not as a tech stock.
So, it can be said that QTEC's ascent to an all-time high last Friday is all the more impressive given that the ETF features no exposure to Amazon and no exposure to recently resurgent biotech names.
Honing in on what are the driving forces behind QTEC's 13.3 percent year-to-date, which is more than double that of the traditional NASDAQ-100, semiconductor and software stocks combine for nearly two-thirds of the ETF's weight. Six of QTEC's top 10 holdings are chip names. No stock commands a weight of more than 3.47 percent among QTEC's 36 holdings.
Interestingly, Apple Inc. (NASDAQ: AAPL) is just 2.9 percent of QTEC's weight compared with being 10.6 percent of the standard NASDAQ-100 Index.
““Earnings growth has slowed for the Tech sector, and this year may stall altogether. But margins and ROE remain impressively high and the long-term EPS growth forecast still exceeds that for the S&P 500. Meanwhile the sector trades at a P/E discount to the S&P 500, whereas historically it has enjoyed a premium,” according to AltaVista Research.
QTEC has $280.2 million in assets under management and charges 0.6 percent per year, or $60 on a $10,000 investment.
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