One of the most oft-cited reasons for another year of laggard performances from high-fee active managers is that these supposedly super stock pickers have been under-allocated to Apple (NasdaqGS: AAPL).
Somehow, someway, active managers have been underweight the largest U.S. company by market value as the shares have soared over 45%. The iPad maker is one of just 76 S&P 500 stocks sporting a year-to-date gain of at least 30% and Apple’s bullishness has stoked talk of returns to pre-dot com bubble highs for the NASDAQ Composite and the Powershares QQQ (NasdaqGM: QQQ). [Tech ETFs Can Keep Climbing]
Proving that the underweight Apple posture is not the only issue hampering active managers this year, some NASDAQ ETFs with light Apple allocations have already been touching all-time highs. That is true of the First Trust NASDAQ-100 Equal Weighted Index Fund (NasdaqGS: QQEW) and the Direxion NASDAQ-100 Equal Weighted Index Shares (NYSEArca: QQQE), two ETFs that are equal-weight alternatives to QQQ.
True to its equal-weight roots, QQQE allocates just 1% to each of its 100 holdings, meaning Apple and Microsoft (NasdaqGS: MSFT), another out-performing tech stock fund managers have been woefully under-allocated to, combined for just 2% of the ETF’s weight at the end of the third quarter.
Predictably, QQQE’s low weights to Apple and Microsoft have the ETF lagging QQQ, but the equal-weight offering is still up 16.5% this year, outpacing the S&P 500, NASDAQ Composite and Russell 1000 Index along the way. [NASDAQ the Equal-Weight Way]
Another ETF exposing the fallacy of active management’s lagging performance being mostly attributable to being underweight Apple and Microsoft is the First Trust Nasdaq-100 Tech Index (NasdaqGM: QTEC). The $332.4 million QTEC, which debuted in April 2006, only holds the 41 technology stocks found in the NASDAQ-100.