Investors often associate the Nasdaq-100 Index (NDX) with growth, and that’s an accurate view because, due in large part to a significant overweight to tech stocks, the index has long outperformed other broad-based domestic equity indexes.
However, another benefit of NDX-tracking exchange traded funds such as the Invesco NASDAQ 100 ETF (QQQM) is a surprising amount of quality stocks residing in these investment vehicles. That stands to reason thanks to the index’s large weights to the likes of Apple (NASDAQ:AAPL) and Microsoft (NASDAQ:MSFT), among others, but QQQM offers more quality beyond those mega-cap tech names.
That’s a trait to ponder because, in the early days of 2022, markets are making it clear that quality matters and speculative stocks are enduring pain. To that end, Goldman Sachs recently released a list of quality stocks, and it’s chock-full of QQQM components.
“Information technology and health-care stocks dominate the list. Chipmakers Micron Technology and Qualcomm are among Goldman’s picks, along with test and automation stock Teradyne,” reports Tanya Macheel for CNBC.
In order, Qualcomm and Micron Technology combine for about 2.2% of QQQM’s roster. Among the healthcare names appearing on the Goldman list are COVID-19 vaccine giant Moderna (NASDAQ:MRNA) and Regeneron Pharmaceuticals (NASDAQ:REGN). Those two stocks combine for almost 1% of QQQM’s weight.
While Moderna rose to acclaim over the past year-plus due to visibility in the fight against the coronavirus pandemic, many investors may not be aware of the stock’s deep quality traits.
“Moderna has the highest free cash flow yield, 20%, on the quality stock list. The metric is an indicator of a company’s solvency, and it’s measured based on a stock’s market cap,” according to CNBC. “Moderna also has the highest margins at 56%.”
Google parent Alphabet (NASDAQ:GOOG) is the largest company on the Goldman list. The two share classes of the internet search giant combine for 7.52% of QQQM’s weight.
Video game behemoth Electronic Arts (NASDAQ:EA), a smaller member of the QQQM portfolio, also appears on the Goldman quality list.
Overall, the $3.76 billion QQQM holds 103 stocks, 51.1% of which hail from the tech sector.
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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.
