The PowerShares QQQ (NasdaqGM: QQQ), the NASDAQ-100 tracking exchange traded fund, entered Friday trading at its highest levels since 2000. However, another PowerShares ETF merits consideration for Nasdaq upside in 2015.
Though it debuted in May 2003, the PowerShares DWA NASDAQ Momentum Portfolio (NasdaqGM: DWAQ) is unheralded compared to QQQ. Then again, many ETFs are because QQQ is one of the largest ETFs in the world.
In its current form, DWAQ is less than a year old because the fund was one of 10 PowerShares ETFs that transitioned to momentum indices from Dorsey Wright & Associates in February. The fund was formerly known as the PowerShares Dynamic OTC Portfolio. [Changes for PowerShares ETFs]
DWAQ tracks the Dorsey Wright NASDAQ Technical Leaders Index. That index is comprised of “a universe of approximately 1,000 common stocks having the largest market capitalizations and traded on the NASDAQ exchange,” according to PowerShares.
Like the other PowerShares ETFs that track Dorsey Wright’s relative strength-based indices, DWAQ is passively managed. However, the relative strength methodology lends itself to increased flexibility in weighting and component selection compared to traditional cap-weighted ETFs.
When many investors think of the Nasdaq and QQQ, they think of large weights to the technology sector. However, as DWAQ shows, momentum is not limited to tech and Internet stocks. DWAQ’s largest sector weight is a 29.1% allocation to health care, nearly double QQQ’s weight to the same sector.
Seven of DWAQ’s top 10 holdings are health care stocks and since DWAQ is a Nasdaq-focused ETF, that health care exposure means big biotech exposure. And that means DWAQ’s 10% climb over the past three months has been driven in part by biotech bullishness. [Biotech ETFs Race to New Highs]
DWAQ does not skimp on technology stocks, but its 27.7% weight to that sector is less than half QQQ’s tech weight. Like QQQ, DWAQ features Apple (NasdaqGS: AAPL) as its largest holding, though at just 3%.