Is Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE) a Strong ETF Right Now?
The Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE) made its debut on 03/21/2012, and is a smart beta exchange traded fund that provides broad exposure to the Style Box - Large Cap Growth category of the market.
What Are Smart Beta ETFs?
The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Managed by Direxion, QQQE has amassed assets over $1.02 billion, making it one of the average sized ETFs in the Style Box - Large Cap Growth. This particular fund 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.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
Annual operating expenses for QQQE are 0.35%, which makes it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 0.81%.
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.
Representing 38.80% of the portfolio, the fund has heaviest allocation to the Information Technology sector; Consumer Discretionary and Healthcare round out the top three.
When you look at individual holdings, Sirius Xm Holdings Inc (SIRI) accounts for about 1.13% of the fund's total assets, followed by Crowdstrike Holdings Inc - A (CRWD) and Zscaler Inc (ZS).
The top 10 holdings account for about 10.87% of total assets under management.
Performance and Risk
So far this year, QQQE has gained about 32.02%, and is up about 29.43% in the last one year (as of 12/19/2023). During this past 52-week period, the fund has traded between $62.46 and $83.84.
QQQE has a beta of 1.06 and standard deviation of 22.21% for the trailing three-year period, which makes the fund a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.
Alternatives
Direxion NASDAQ-100 Equal Weighted Index Shares is an excellent option for investors seeking to outperform the Style Box - Large Cap Growth segment of the market. There are other ETFs in the space which investors could consider as well.
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 $103.43 billion in assets, Invesco QQQ has $226.97 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
Invesco QQQ (QQQ): ETF Research Reports
Vanguard Growth ETF (VUG): ETF Research Reports
Zscaler, Inc. (ZS) : Free Stock Analysis Report
CrowdStrike (CRWD) : Free Stock Analysis Report
