Capitalize on Further Strength in Megacaps with This ETF

Tech giants like Facebook, Apple, Google, Microsoft, and Amazon have thrived during the Covid-19 pandemic as individuals and businesses are utilizing more technology in order to adjust to the new normal. Even as economies start to reopen, it should be a seamless transition for these tech giants, which should duly benefit mega cap-focused exchange-traded funds (ETFs).

“They’ve all been beneficiaries of the massive demand for anything and everything that helps businesses or individuals communicate and transact online during the Covid-19 lockdowns. And their strong balance sheets have led them to better weather the economic storms than their competitors,” per The Street article.

“I like to say the crisis has accelerated the inevitable,” says Mark Mahaney, an RBC analyst who covers internet stocks. “We’ve had two decades of migration of products and services online. And we just accelerated that by one or two years — compressed into the span of two months.”

In particular, companies like Facebook and Google should return to their pre-Covid-19 levels by year’s end.

“Those two should be almost back to full growth by the end of this year, if not early next year,” said Mahaney.

Mega Cap Exposure via ETFs

Exchange-traded fund (ETF) investors looking to take advantage of mega caps can look to the Principal U.S. Mega-Cap Multi-Factor Index ETF (USMC). USMC seeks to provide investment results that closely correspond, before expenses, to the performance of the Nasdaq US Mega Cap Select Leaders Index.

Under normal circumstances, the fund invests at least 80% of its net assets, plus any borrowings for investment purposes, in equity securities that compose the index at the time of purchase. The index uses a quantitative model designed to identify equity securities of companies in the Nasdaq US 500 Large Cap Index (the “parent index”) that have the largest market capitalizations, with higher weights given to less volatile securities.

Another fund to consider is the Vanguard Mega Cap Growth Index Fund ETF Shares (MGK). The fund seeks to track the performance of the CRSP US Mega Cap Growth Index.

The fund employs an indexing investment approach designed to track the performance of the index. The index is a float-adjusted, market-capitalization-weighted index designed to measure equity market performance of mega-capitalization growth stocks in the United States. The Advisor attempts to replicate the target index by investing all, or substantially all, of its assets in the stocks that make up the index, holding each stock in approximately the same proportion as its weighting in the index.

For more market trends, visit ETF Trends.