Is Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE) a Strong ETF Right Now?
Making its debut on 03/21/2012, smart beta exchange traded fund Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE) provides investors broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Market cap weighted indexes work great for investors who believe in market efficiency. They provide a low-cost, convenient and transparent way of replicating market returns.
If you're the kind of investor who would rather try and beat the market through good stock selection, then smart beta funds are your best choice; this fund class is known for tracking non-cap weighted strategies.
This kind of index follows this same mindset, as it attempts to pick stocks that have better chances of risk-return performance; non-cap weighted strategies base selection on certain fundamental characteristics, or a mix of such characteristics.
The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.
Fund Sponsor & Index
The fund is managed by Direxion, and has been able to amass over $836.44 million, which makes it one of the average sized ETFs in the Style Box - Large Cap Growth. This particular fund, before fees and expenses, seeks to match the performance of the NASDAQ-100 Equal Weighted Index.
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.
Cost & Other Expenses
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
With on par with most peer products in the space, this ETF has annual operating expenses of 0.35%.
It's 12-month trailing dividend yield comes in at 0.84%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
This ETF has heaviest allocation in the Information Technology sector - about 34.90% of the portfolio. Consumer Discretionary and Healthcare round out the top three.
When you look at individual holdings, Old Dominion Freight Line (ODFL) accounts for about 1.27% of the fund's total assets, followed by Sirius Xm Hldgs Inc (SIRI) and Airbnb Inc (ABNB).
The top 10 holdings account for about 11.53% of total assets under management.
Performance and Risk
The ETF has added about 19.57% so far this year and is up roughly 4.41% in the last one year (as of 08/17/2023). In the past 52-week period, it has traded between $58.71 and $80.76.
The ETF has a beta of 1.06 and standard deviation of 22.73% 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 is a reasonable option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Growth ETF (VUG) tracks CRSP U.S. Large Cap Growth Index and the Invesco QQQ (QQQ) tracks NASDAQ-100 Index. Vanguard Growth ETF has $90.16 billion in assets, Invesco QQQ has $198.13 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Style Box - Large Cap Growth.
Bottom Line
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
Sirius XM Holdings Inc. (SIRI) : Free Stock Analysis Report
Old Dominion Freight Line, Inc. (ODFL) : Free Stock Analysis Report
Invesco QQQ (QQQ): ETF Research Reports
Vanguard Growth ETF (VUG): ETF Research Reports
Airbnb, Inc. (ABNB) : Free Stock Analysis Report
