With internet and communication services stocks among the biggest drivers of the Nasdaq-100 Index’s stellar returns this year, investors looking to drill down further on that theme ought to consider the Invesco NASDAQ Internet ETF (PNQI).
PNQI seeks to track the investment results (before fees and expenses) of the NASDAQ Internet Index. The fund generally will invest at least 90% of its total assets in securities that comprise the underlying index. The underlying index is designed to track the performance of the largest and most liquid U.S.-listed companies engaged in Internet-related businesses that are listed on one of the three major U.S. stock exchanges.
Up 43.1% year-to-date, PNQI hit an all-time on Thursday. On a standalone basis, those are impressive factoids, but there’s more to the PNQI story.
PNQI and its Nasdaq benchmark are topping the rival Dow Jones Internet Composite Index by 740 basis points this year.
Not a New Trend
PNQI beating the Dow Jones Internet Composite Index isn’t a new trend. Over the past two years, the Invesco ETF is beating that benchmark by 1,640 basis points while being 110 basis points less volatile. That’s the definition of superior risk-adjusted returns.
The $825.6 million PNQI turned 12 years old in June. One of the secrets to the fund’s success is that includes companies that aren’t based in the U.S., including Alibaba (NYSE: BABA) and Shopify (NYSE: SHOP). Many US-focused internet ETFs, due to index requirements, exclude foreign companies.
Whether it’s foreign domestic, PNQI offers ample e-commerce exposure at a time when that market is exploding.
A report out Tuesday from the Commerce Department said online retail sales surged 31.8% year-over-year in the second quarter and that e-commerce accounted for 13.1% of all U.S. retail sales during the April through June period.
“The Census Bureau of the Department of Commerce announced today that the estimate of U.S. retail e-commerce sales for the second quarter of 2020, adjusted for seasonal variation, but not for, was $211.5billion, an increase of 31.8percent(±1.2%) from the first quarter of 2020,” according to the report.
Another meaningful difference between PNQI and rival funds is that the Invesco ETF doesn’t limit its roster to just consumer discretionary and communication services stocks. The tech sector accounts for over 28% of the fund’s weight and PNQI’s exposures from that sector put the fund at the corner of exciting themes, including cloud computing and work from home.
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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.