The highly traded Nasdaq-100 ETF is handily outperforming the market in 2012 thanks to the 40% rally in top holding Apple (NasdaqGS: AAPL - News). Now Morgan Stanley is out with a price target of $960 a share for the Wall Street darling.
PowerShares QQQ (NasdaqGM: QQQ) is up 18.7% this year, versus an 11.5% advance for the S&P 500.
Apple represents 17.8% of the tech-heavy tracking index, the Nasdaq-100. [ETF Chart of the Day: Nasdaq-100 Index]
The gravity-defying stock is moving higher again toward $600 following a brief pullback earlier this month.
Many tech sector ETFs have huge weightings in Apple due to its giant market cap. [Technology ETFs with Big Positions in Apple]
The rally in Apple has “had some unexpected effects that investors should be aware of: chief among them is the risk of overconcentration, as a great many indices and the ETFs that track them are weighted by market cap,” writes Dave Fry at ETF Digest.
Some sector ETFs use equal-weighted strategies to avoid concentration in individual tech stocks. They include First Trust Nasdaq 100 Equal Weighted Index Fund (NasdaqGM: QQEW) and Guggenheim S&P 500 Equal Weight Technology (NYSEArca: RYT).
- Morgan Stanley