It’s the time of year when investors are treated to a slew of market predictions for the next year. The onslaught of those offerings is dizzying. Add those predictions up and it’s likely market participants can absorb hundreds of stock picks for the year ahead. That’s neither efficient nor practical for many investors to have portfolios populated in the dozens or hundreds. The good news is that some of the stocks market observers are most bullish on for 2024 are found in several familiar, cost-effective ETFs. Those include the Invesco QQQ Trust (QQQ) and Invesco NASDAQ 100 ETF (QQQM).
The two Nasdaq-100 Index (NDX)-tracking ETFs have delivered stellar showings this year. They have surged 52.22% as of December 15. QQQ and QQQM may not deliver comparable performances in 2024. But more upside is possible for the ETFs next year. That’s assuming predictions about some of the funds’ holdings prove accurate.
Familiar Names Could Lift QQQ, QQQM in 2024
This year, QQQ and QQQM benefited in large part from significant exposure to the magnificent seven. That group includes Apple, Alphabet (Google), Meta Platforms, Amazon.com, Nvidia, Microsoft, and Tesla. On aggregate basis, that group delivered jaw-dropping showings this year. Some analysts believe it’s possible some of the super seven could build on 2023 gains next year.
Alphabet is “expected to grow as fast as Microsoft, with earnings forecast to be up 15% in 2024, three times as quickly as Apple’s 5% growth. Yet its stock trades for just 20 times earnings, a discount to both Microsoft and Apple’s 30 times, despite gaining 50% this year,” reported Andrew Bary for Barron’s. “Investors have been worried about slowing growth in Alphabet’s cloud computing division, the threat that artificial intelligence poses to its search business, and antitrust scrutiny. Those issues look manageable.”
QQQ and QQQM have long been associated with growth investing. That’s rightfully so given the ETFs’ large weights to tech and communication services stocks. But it might surprise some investors to learn the funds have some defensive exposure.
Take the case of Pepsico (PEP), which is the second-largest consumer staples holding in the ETFs behind Costco (COST).
“Fears that weight-loss drugs will curb snacking caused PepsiCo stock, at $168, to drop 7% in 2023. A confident Pepsi, though, said in October that it expects to deliver per-share earnings growth at the top of its high-single-digit annual target in 2024 after a projected 13% gain this year. And the stock trades for 20.6 times next year’s projected earnings, below its five-year average. It also yields 3% and has raised its dividend for 51 straight years, including a 10% increase this past summer,” according to Barron’s.
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