Should Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE) Be on Your Investing Radar?
Looking for broad exposure to the Large Cap Growth segment of the US equity market? You should consider the Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE), a passively managed exchange traded fund launched on 03/21/2012.
The fund is sponsored by Direxion. It has amassed assets over $641.44 million, making it one of the average sized ETFs attempting to match the Large Cap Growth segment of the US equity market.
Why Large Cap Growth
Companies that find themselves in the large cap category typically have a market capitalization above $10 billion. Overall, they are usually a stable option, with less risk and more sure-fire cash flows than mid and small cap companies.
Qualities of growth stocks include faster growth rates compared to the broader market, as well as higher valuations and higher than average sales and earnings growth rates. Something to keep in mind is the higher level of volatility that is affiliated with growth stocks. When you consider growth versus value, growth stocks are usually the clear winner in strong bull markets but tend to fall flat in nearly all other environments.
Costs
Expense ratios are an important factor in the return of an ETF and in the long term, cheaper funds can significantly outperform their more expensive counterparts, other things remaining the same.
Annual operating expenses for this ETF are 0.35%, putting it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 0.84%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure which minimizes single stock risk, it is still important to look into a fund's holdings before investing. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation to the Information Technology sector--about 99.80% of the portfolio. Energy and Industrials round out the top three.
Looking at individual holdings, Lululemon Athletica Inc (LULU) accounts for about 1.19% of total assets, followed by Diamondback Energy Inc Usd 0.01 (FANG) and Netflix Inc. (NFLX).
The top 10 holdings account for about 10.84% of total assets under management.
Performance and Risk
QQQE seeks to match the performance of the NASDAQ-100 Equal Weighted Index before fees and expenses. The NASDAQ-100 Equal Weighted Index consists of companies in the NASDAQ-100 Index but each of the securities is initially set at a weight of 1.00% of the Index. The NASDAQ-100 Index includes 100 of the largest non-financial securities listed on NASDAQ based on capitalization.
The ETF has added about 19.32% so far this year and is up about 16.48% in the last one year (as of 06/28/2023). In the past 52-week period, it has traded between $58.71 and $77.41.
The ETF has a beta of 1.05 and standard deviation of 22.81% for the trailing three-year period, making it a medium risk choice in the space. With about 102 holdings, it effectively diversifies company-specific risk.
Alternatives
Direxion NASDAQ-100 Equal Weighted Index Shares carries a Zacks ETF Rank of 3 (Hold), which is based on expected asset class return, expense ratio, and momentum, among other factors. Thus, QQQE is a sufficient option for those seeking exposure to the Style Box - Large Cap Growth area of the market. Investors might also want to consider some other ETF options in the space.
The Vanguard Growth ETF (VUG) and the Invesco QQQ (QQQ) track a similar index. While Vanguard Growth ETF has $90.88 billion in assets, Invesco QQQ has $195.27 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Bottom-Line
An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE): ETF Research Reports
Netflix, Inc. (NFLX) : Free Stock Analysis Report
lululemon athletica inc. (LULU) : Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Diamondback Energy, Inc. (FANG) : Free Stock Analysis Report
Vanguard Growth ETF (VUG): ETF Research Reports
