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5 Red Hot Stocks That Drove Nasdaq ETF to New Highs

Sweta Killa

The Nasdaq Composite Index reached another all-time high amid the coronavirus epidemic that has hurt business operations in the world's second largest economy. This was driven by China’s stimulus measures, which helped soothe investor nerves.

The People’s Bank of China has injected $1.7 trillion yuan ($242.9 billion) into the economy via reverse repos and unexpectedly lowered interest rates on reverse repurchase agreements by 10 basis points (bps). The move led to a strong rally in the technology sector, which has huge exposure to China, and helped the tech-laden Nasdaq Composite Index to reach new highs. The initial U.S.-China trade deal is also providing a boost to the tech stocks (read: Best & Worst ETFs of Coronavirus-Affected January).

Additionally, a solid rebound in the U.S. manufacturing sector, which had languished in contraction territory for five months, boosted investors’ confidence in the economy and the stock market. The Institute for Supply Management’s PMI rose to 50.9 in January from a December reading of 47.8, with strength in new orders, production and exports.

As a result, Invesco QQQ QQQ, which serves as a proxy for the index, also hit new highs, having gained 7% so far this year. Let’s take a closer look at the fundamentals of QQQ.

QQQ in Focus

This ETF provides exposure to 103 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. Information technology accounts for 47.5% of the assets, while communication services holds 21% share. QQQ is one of the largest and most popular ETFs in the large-cap space with AUM of $89.9 billion and average daily volume of around 25.7 million shares. It charges investors 20 bps in annual fees. The fund has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook (read: January ETF Asset Report: U.S. Equities Win).

Though most of the stocks in the fund’s portfolio have delivered strong returns so far this year, a few were the real stars, having gained in double-digits. Below we have highlighted the five best-performing stocks in the ETF with their respective positions in the fund’s basket:

Top-Performing Stocks in QQQ

Tesla Inc. TSLA: This company designs, produces and sells electric cars, solar energy generation systems and energy storage product. The stock has surged nearly 132% this year and has 1.5% exposure in the fund’s basket. It has witnessed solid earnings estimate revision of $1.76 over the past month for this year, with an expected earnings growth rate of 5684.6%. The stock has a Zacks Rank #3 (Hold) and a VGM Score of C (read: ETFs to Soar as Tesla Beats on Q4 Earnings, Shares Spike).

MercadoLibre Inc. MELI: This is one of the largest e-commerce platforms in Latin America. The stock has climbed 24.1% this year and saw positive earnings estimate revision of couple of cents over the past month for this year with an expected earnings growth rate of 68.9%. MercadoLibre has a Zacks Rank #2 (Buy) and a VGM Score of D. The stock accounts for 0.4% of the fund.

Workday Inc. WDAY: This company is a provider of enterprise-level software solutions for financial management and human resource domains. It saw no earnings estimate revisions over the past 30 days for this fiscal (ending January 2021). It has an expected earnings growth of 21.2%. The stock has a Zacks Rank #3 and a VGM Score of B. Workday makes up for 0.3% allocation and has delivered robust returns of 18.3% this year so far.

Microsoft Corporation MSFT: This is one of the largest broad-based technology providers in the world today. It has witnessed positive earnings estimate revision of 29 cents over the past month for this fiscal year (ending June 2020), with an expected earnings growth rate of 18.7%. Microsoft has jumped 14.7% this year so far. It carries a Zacks Rank #1 and has a VGM Score of C. The stock occupies the second position in QQQ portfolio, and accounts for 11.3% share. You can see the complete list of today’s Zacks #1 Rank stocks here.

CoStar Group Inc. CSGP: This company provides information services to the commercial real estate industry. The stock saw no earnings estimate revision for this year over the past month and has projected earnings growth rate of 4.3%. The stock has rallied 14.6% this year so far and accounts for 0.3% of the fund portfolio. Currently, CSGP has a Zacks Rank #3 and a VGM Score of C.

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