Not even two months in, the Invesco NASDAQ Next Gen 100 ETF (QQQJ) is already one of the success stories among the 2020 crop of rookie exchange traded funds. A strong case can be made that the new Invesco fund is just getting started.
QQQJ, which is almost a month old, extends this concept further by offering access to the “next 100” non-financial companies listed on the Nasdaq, outside of the NASDAQ-100 Index, offering a mid-cap alternative to the NASDAQ-100. In other words, QQQJ is a proving ground for companies that could eventually be added to the popular Invesco QQQ Trust (NASDAQ: QQQ).
“The Nasdaq Next Generation 100® (NGX) Index is designed to measure the performance of the next generation of Nasdaq-listed non-financial companies; that is, the largest 100 securities outside of the Nasdaq-100 Index,” according to Nasdaq Global Indexes. “The index deploys the proven methodology behind the time-tested Nasdaq-100 Index, with its emphasis on innovation and growth.”
QQQJ Has Tech Exposure, But Not Just for Large-Caps
Like parent ETF QQQ, QQQJ gives investors tech exposure, but with a mid-cap twist. While large-cap companies in tech like Apple or Microsoft are solid plays, there are also opportunities to be had in mid-cap companies that investors may not know about due to a lack of media exposure.
“To be eligible for inclusion in the index, a security must meet the existing Nasdaq-100 Index eligibility criteria. The index begins with the universe of all companies, both domestic and foreign, that are listed on the Nasdaq Stock Market (issuer of the security’s primary U.S. listing must exclusively be listed on the Nasdaq Global Select Market or Nasdaq Global Market exchanges),” according to Nasdaq.
Furthermore, QQQJ gives investors additional diversification to capture any upside in mid-cap trends they might miss by strictly staying in large-caps.
With challenges up ahead for the heavy hitters in tech, QQQJ can capitalize on mid-cap market trends that can power through the pandemic. With the government scrutiny aimed at tech heavyweights, QQQJ flies under the radar.
“The difference in industry exposure is a prime example of how the Nasdaq-100 and Nasdaq Next Generation 100 complement each other. The Nasdaq-100 has a much more meaningful overweight towards Technology, while the Nasdaq Next Generation 100 has a larger tilt towards Health Care and Industrials,” notes Nasdaq.
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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.