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New ETF Offers Exposure To Next Up Nasdaq-100 Members

ETF Professor

Even with the recent pullback in technology stocks, the Nasdaq-100 Index (NDX) is trouncing the S&P 500 again this year, bringing fresh acclaim to the former and new assets to exchange-traded funds tracking that benchmark.

What Happened: For those wondering from where many Nasdaq-100 members hail, the answer is easy: the Nasdaq Q-50 Index (NXTQ), a benchmark that is something of a “junior varsity” for aspiring NDX members.

With Thursday's debut of the VictoryShares Nasdaq Next 50 ETF (NASDAQ: QQQN), the Q-50 Index finally has an ETF linked to it. “Finally” because the NDX proving ground is nearly 13 years old.

“The Index is comprised of 50 securities ranked by market capitalization and reflects companies across major industry groups including computer hardware and software, telecommunications, retail/wholesale trade, and biotechnology. It does not contain securities of financial companies including banking and investment companies, as these are ineligible for NASDAQ-100 Index inclusion,” according to Nasdaq Global Indexes.

Why It's Important: Reminding investors that past performance doesn't guarantee future results is particularly relevant with QQQN, but it's worth noting some previous Nasdaq Q-50 members went on to become story stocks, including Facebook (NASDAQ: FB), Netflix (NASDAQ: NFLX) and, this year, Moderna (NASDAQ: MRNA).

Top holdings in the new QQQN included Marvell Technology (NASDAQ: MRVL), Old Dominion Freight Line (NASDAQ: ODFL), Okta (NASDAQ: OKTA) and Atlassian (NASDAQ: TEAM).

The NASDAQ Q-50 Index is currently home to 48 securities, not 50.

The Nasdaq Q-50 Index has been live and proven for more than 10 years. Its methodology aligns with the innovation and growth focus behind the time-tested Nasdaq-100 Index, but with an emphasis on forward-thinking companies on the vanguard of market leadership and technological advancement,” according to Victory Capital.

What's Next: Given the market capitalization range of many of QQQN's smaller to medium-sized components, the new ETF can be an alternative to traditional mid-cap strategies. Since its inception, the Q-50 Index nearly doubled the performance of the Russell Midcap Index.

Like the Nasdaq-100, QQQN and the Q-50 Index are heavy on technology stocks. That sector accounts for 45.73% of the new ETF's weight with health care and industrial names combining for almost 32%.

QQQN charges 0.18% percent per year, or $18 on a $10,000 investment, making it slightly less expensive than the comparable Nasdaq-100 tracking ETF.

Image credit: bfishadow, Flickr

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