Today, QQQ also sports a 22% weight to consumer discretionary names, compared almost zilch in 2000. That does include pricey high-fliers like Amazon (NasdaqGM: AMZN) and Priceline (NasdaqGM: PCLN), but more prosaic businesses such as Starbucks (NasdaqGM: SBUX) and DirecTV (NasdaqGM: DTV) are also found among QQQ’s discretionary names. [The Changing Face of QQQ]
Even with the run-up in those stocks this year, the Nasdaq is far cheaper today than it was in the late 1990s or earlier this century. When the bubble was at its biggest, the index had a price-to-earnings ratio of 194:1, which means investors were paying $194 for every $1 of earnings the companies in the index brought in, according to the AP. That compares with today’s P/E of less than 24.
QQQ had a P/E of 18.6 at the end of third quarter, according to PowerShares data.
These days, the talk centers around the Nasdaq returning to 5,000 (its all-time high is just under 5,050), but its inflation adjusted peak is 6,845.83, a long way from Tuesday’s close at 4,060.
Apple, Amazon, Google and friends will certainly play a role in future upside for QQQ and the Nasdaq, but, as the AP notes, the health care sector’s impact on the Nasdaq should not be discounted. Health care and the Nasdaq means biotech and medical devices.
Biotech has already been driving the Nasdaq as several biotech funds, including the iShares Nasdaq Biotechnology ETF (NasdaqGS: IBB), have been among the best-performing sector ETFs for several years now. [2012’s Best Sector ETFs Kept Soaring This Year]
PowerShares QQQ
Tom Lydon’s clients own shares of Apple, Amazon, Microsoft, Google and QQQ.