After a post-pandemic run that took big tech to new heights, FAANG stocks were due for a pullback in the first quarter of 2021. Yet are big tech and funds like the Invesco NASDAQ 100 ETF (QQQM) poised for another impressive move?
QQQM is based on the NASDAQ-100 Index (Index). The Fund will invest at least 90% of its total assets in the securities that comprise the Index.
The Index includes securities of 100 of the largest domestic and international nonfinancial companies listed on Nasdaq. At a 0.15% expense ratio, the fund can also be used as a trader’s tool, albeit without the liquidity of its bigger brother, the Invesco QQQ Trust (QQQ).
The Nasdaq 100 was down about 8% off its year-to-date high towards the end of March, but that dynamic is shifting towards the upside. The index was down about 4% in the end of March, but has rallied to be up about 7% for the year.
“The plays that have benefited the last several months — the reopening plays value, small caps — may in fact take a pause because they’ve run so far,” BTIG’s Julian Emanuel, the firm’s chief equity and derivatives strategist, told CNBC.
“This was a very lonely call several weeks ago that large cap tech FAANG looks very interesting to us,” said Emanuel. “The secular growers have been cast aside in the first quarter in favor of value.”
Who’s QQQM For?
As mentioned, the QQQ is loved by traders for its high liquidity, making it a prime trading tool, but QQQM comes with its own benefits. Its updated structure gives it more options.
“Many older funds like QQQ, which launched in 1999, were structured as trusts,” an ETF Database analysis explained. “Trusts, unlike many other equity ETFs, can’t lend out the stocks in their portfolio, and use the revenue to help offset fees. They also can’t reinvest dividends, which many buy-and-hold savers prefer. The Q mini can do both.”
“For the buy-and-hold saver, the mini-Q is likely the more appealing option: lower fees, smaller share price, reinvested dividends,” the analysis added. “But big institutional investors and high-speed firms will likely stick with QQQ, at least for now; the larger size makes QQQ cheaper to trade, and the QQQ has a sizable lead when it comes to liquidity.”
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