As has been widely noted, technology is the best-performing sector in the S&P 500 this year. Predictably, that is helping an array of exchange traded funds tracking the sector deliver stellar performances while adding new assets.
Investors are also turning a familiar ETF for their technology exposure: the PowerShares QQQ (NasdaqGM: QQQ), which tracks the tech heavy Nasdaq-100. Up 20.6% year-to-date, QQQ resides near record highs and has been buoyed by mega-cap tech and Internet names such as Apple Inc. (NASDAQ: AAPL), Amazon.com Inc. (NASDAQ: AMZN), Facebook Inc. (NASDAQ: FB) and Google parent Alphabet Inc. (NASDAQ: GOOG).
For the week ended May 26, investors “added $1.78 billion in a single day to the PowerShares QQQ Trust Series 1 ETF, a fund that tracks the Nasdaq 100 Index. While not a pure tech play, QQQ holds companies like Amazon.com Inc. and Netflix Inc. (NASDAQ: NFLX),” stocks not found in dedicated technology ETFs, reports Carolina Wilson for Bloomberg.
Amazon and Netflix are classified as consumer discretionary stocks. As a result, they reside in consumer discretionary, not technology ETFs. QQQ allocates 22.1% of its weight to consumer discretionary stocks, its second-largest sector weight after 58.6% to technology.
QQQ is a popular alternative. And technology has been a great place to be in recent months. Since the November U.S. presidential election, technology is the best-performing sector.
However, with technology’s ascent and that of QQQ, come concerns that the Nasdaq-100 is too heavily exposed to a small number of stocks. Additionally, some analysts opine that the benchmark’s significant technology overweight leaves it vulnerable should tech stocks fall out of favor.
QQQ, one of the largest U.S. ETFs, has equal-weight equivalents equal-weight equivalents such as the Direxion NASDAQ-100 Equal Weighted Index Shares (NYSEArca: QQQE) and the First Trust NASDAQ-100 Equal Weighted Index Fund (NasdaqGS: QQEW).
QQQ “has been around since 1999, and in that time has become among the most liquid ETFs in the world, trading around 24 million shares a day, according to data compiled by Bloomberg,” reports the news agency.
Year-to-date, investors have added $2.68 billion to QQQ, double the total added by the next closest PowerShares ETF.
For more news and strategy on the Technology market, visit our Technology category.
Tom Lydon’s clients own shares of Apple, Facebook and QQQ.