27 Jul 2021 22:59
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QQQ is Nasdaq-100 Index Tracking Stock equity emitted by PowerShares QQQ Trust, Series 1. It is governed by Invesco.
The trust, formerly known as NASDAQ-100 Trust, Series 1, aims at achieving investment results that generally follow the price and yield of the Nasdaq-100. Investors are offered ownership proportional to the portion of equity owned by the fund. This ETF is one of the most popular traded products.
History, structure, and governance
The QQQ ETF was established on March 10th, 1999. Its sponsor is Invesco PowerShares Capital Management LLC, with the Bank of New York Mellon as the protector. Invesco (USA) is among the world’s largest investment companies and serves clients from more than 20 countries in America, Europe, the Middle East, and Asia-Pacific. The Invesco ETF is also unofficially nicknamed the “triple-Qs” or the “cubes”. The QQQ ETF is widely seen as a snapshot of how the technology sector trades.
The ETF includes 100 of the largest companies listed on the NASDAQ stock exchange, just like the Nasdaq 100 index that it tracks.
Nasdaq 100 was launched on January 31st, 1985 as a competitor to the ARCA Tech 100 Index introduced at the NYSE three years earlier.
After the energy crises of the 1970’s, there was a demand for an index that is not dependent on the financial situation and is based on intellectual property. Initially, the idea did not quite work out: in 2007, it traded below 2,240, in 2008 – below 1,018. The high tech sector was not spared the calamities of the oil and mortgage crises, nor was it boosted by the decrease in consumption volumes. Only after 2010 did the Nasdaq 100 start to grow steadily.
The ETF invests only in non-financial shares. QQQ’s main targets are companies in information technology (48.21%), communications (19.14%), consumer discretionary (18.93%), health care (6.67%), consumer goods (4.67%), industrial (1.76%), and utilities (0.61%) (as of 2020).
The Invesco QQQ Trust has an MSCI ESG Fund rating of BBB based on a score of 5.7 out of 10. The rating measures portfolio stability.
Capital and income
The Nasdaq 100 index is a calculated indicator of several thousands of high tech companies. The Invesco QQQ ETF, unlike the Nasdaq 100, is a marketable security that is traded on stock exchanges. Through the ETF, traders are able to invest in 100 largest non-financial companies listed on the NASDAQ.
The margin of safety of QQQ as a rule is too expensive. For example, in September 2020, its price-earnings ratio was 47.48. In the autumn of 2020, about 56% of all assets of the “cubes” were in 10 leading shares: Apple (AAPL) – 13.39%, Microsoft (MSFT) – 10.76%; Amazon (AMZN) – 10.66%, Facebook A (FB) – 4.26%, Tesla Motors (TSLA) – 3.45%, Alphabet A (GOOGL) – 3.42%, Alphabet C (GOOG) – 3.31%, Nvidia (NVDA) – 2.88%, Adobe Systems (ADBE) – 2.03%, and PayPal (PYPL) – 1.99%.
As most assets do, the QQQ ETF has its pros and cons. The advantages are big bull market rewards, long-term growth potential, good liquidity, and expenses. Among the disadvantages are high bear market risks, sector risks, high valuation levels, and absence of small capitalization stocks.
The price of QQQ shares grows and falls with the high tech Nasdaq 100. QQQ is rebalanced quarterly and annually.
The average annual return of QQQ was 20.16% during the 10 years ending September 30th, 2020. The fund’s annual expense ratio is 0.20%. The average monthly trading volume is 60,765,501 shares per day.
The QQQ ETF controls $80.12 billion in assets. Its capitalization is $535.05 billion.