The Nasdaq-100 Index (NDX) has long been home to above-average allocations to growth stocks, and that’s a primary reason why the benchmark has a lengthy history of outperforming traditional beta broad market gauges.
However, that exposure cuts both ways, and as growth stocks falter as they did in the first half of 2022, NDX is vulnerable. So are exchange traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco NASDAQ 100 ETF (QQQM) — both of which benchmark to NDX.
On the bright side, growth stocks are bouncing back, and some remain notably undervalued. Adding to the case for QQQ and QQQM is the point that some of the ETFs’ components aren’t just inexpensive relative to their histories. They’re growing earnings, too, and those discounts and earnings growth can be found across a variety of sectors represented in the ETFs.
In other words, QQQ and QQQM could be ideal ETFs for investors looking for broad baskets of stocks offering growth at a reasonable price (GARP).
Online travel giant Booking Holdings (NASDAQ:BKNG) “is expected to grow earnings per share the most this year — by 108.7% — among the stocks that met the criteria. Shares of the travel company are down about 16% this year and sit 26% off their highs, but could rally 21.2% going forward. About 58% of analysts have a buy rating on the stock. The company’s earnings next year are expected to expand by about 25%,” reported Samantha Subin for CNBC.
As of August 22, BKNG accounts for 0.68% of the QQQ and QQQM rosters. It’s also worth noting that several of the semiconductor stocks that are found in these ETFs check the boxes of attractive valuations and risings earnings per share. Those include Advanced Micro Devices (NASDAQ:AMD), Broadcom (NASDAQ:AVGO), and Marvell Technology (NASDAQ:MRVL). That trio combines for about 4% of QQQ and QQQM.
AMD and Broadcaom “also made the cut, down about 35% and 21%, respectively, this year. Analysts expect AMD to grow earnings by nearly 56% in 2022 and 11.4% in the year ahead,” according to CNBC.
Chinese e-commerce behemoth Pinduoduo (NASDAQ:PDD), which is a smaller member of the QQQ and QQQM portfolios, is another Nasdaq-listed name that offers compelling earnings growth at attractive valuations. Pinduoduo is one of several international consumer internet names held by the two Invesco ETFs.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.