Among the 11 global industry classification standard (GICS) sectors, tech is not the best performer since the start of 2024. Not even close, nor is it the worst offender. Technology remains the largest sector exposure in a variety of domestic equity benchmarks. That cements its status as a must-watch group.
Data confirms some professional market participants are expressing that view. And that indicates the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) are among the broad-market ETFs meriting attention in the months ahead.
Both ETFs track the Nasdaq-100 Index (NDX). That means their rosters feature significantly more exposure to the technology sector than what’s found in the S&P 500. At the start of May, QQQ and QQQM had 49.02% weights to tech. Not to be overlooked is the ETFs’ 15.87% weight to communication services. Also overweight relative to the S&P 500, that exposure has boosted the Invesco ETFs this year. That’s because that sector is the second-best performer — behind only energy.
QQQ Helps Home Gamers Follow Pros
QQQ and QQQM offer investors the benefit of eliminating the stock-picking burden while still accessing portfolios with the potential for impressive long-term returns. That’s highlighted by the ETFs’ penchant for beating the S&P 500 over long time horizons.
Over the near term, the Invesco ETFs could be useful to retail investors. That’s because there’s increasing appetite among pros for tech stocks. During the last full week of April, hedge funds bought more tech stocks than they had in any weekly period since December 2022, according to data from Goldman Sachs’ prime brokerage unit.
“Hedge funds were net buyers of the sector for a fourth straight week, defying weakness in the S&P 500 Information Technology Index, which has been sliding for most of April amid concern the Federal Reserve will keep interest rates higher for longer,” reported Natalia Kniazhevich for Bloomberg.
Among hedge funds’ favorite tech names are Microsoft (MSFT), the largest component in QQQ and QQQM, and Google parent Alphabet (GOOG). Alphabet is classified as a communication services stock. It’s the second-largest holding from that sector residing in the Invesco ETFs.
Hedge funds also displayed enthusiasm for chip stocks. That’s pertinent to investors considering QQQ and QQQM because more than a dozen names from that industry reside in the ETFs.
“While nearly all technology sub-sectors saw inflows, buying was led by semiconductors and semiconductor equipment companies. Hedge funds’ allocation in the sub-sector jumped to 4.4% of the overall US single-stock allocation — the highest level in more than five years — from 1.1% at the start of the year,” Bloomberg reported, citing Goldman data.
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