QQQ’s Quiet Rally

February 19, 2014

When an exchange traded fund is the fourth-largest in the U.S. and home to $45.4 billion in assets under management, doing things quietly is not always easy.

Somehow, some way, the PowerShares QQQ (QQQ) has managed to gain 7% this month without much fanfare. As one member of the StockTwits community pointed out Tuesday, QQQ’s 10-day winning streak prompted a 6.5% gain, the ETF’s best two-week return since December 2011.

Some investors are clearly hopping aboard QQQ’s train as $664.11 million flowed into the ETF in the week ending Feb. 17, according to PowerShares data.

QQQ has been helped by the usual suspects, including Apple (NasdaqGM:AAPPL). The iPad maker is almost 12% of QQQ’s weight, by far the ETF’s largest holding, and is up more than 8% this month. Google (GOOG), QQQ’s second-largest holding, is up almost 7% since the start of February. [Of Google and ETFs]

Give QQQ some credit. It has been more than twice as good as Microsoft (MSFT) and roughly three times as good as Amazon (AMZN) in February. Qualcomm (QCOM), QQQ’s fifth-largest holding, is up just 3.1% this month.

Yes, technology is still the primary driver of QQQ’s performance as the sector accounts for 56.8% of the ETF’s weight, but the Nasdaq Composite has changed over the years.

Today, QQQ also sports a 20.2% weight to consumer discretionary names, compared almost zilch in 2000. That does include pricey high-fliers  like Amazon (AMZN) and Priceline (PCLN), but more prosaic businesses such as Starbucks (SBUX) and DirecTV (DTV) are also found among QQQ’s discretionary names. [The Changing Face of QQQ]

QQQ also features a 14.7% allocation to health care, giving the fund some leverage to the seemingly indomitable (and stretched valuations) in the biotech sector. [Health Care ETFs Face Off Against Frothy Valuations]

Notably, QQQ’s strong February performance comes just ahead of March, a month is often kind to the ETF. With March right around the corner, investors may want to consider because the odds favor a decent performance by the ETF in the third month of the year. In the past 15 Marches, QQQ has risen 11 times, good for a 73% rate of success, according to PastStat.com.

PowerShares QQQ

Tom Lydon’s clients own shares of Apple, Amazon, Google, Microsoft and QQQ.