Should Direxion NASDAQ100 Equal Weighted Index Shares (QQQE) Be on Your Investing Radar?

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If you’re interested in broad exposure to the Large Cap Growth segment of the US equity market, look no further than the Direxion NASDAQ100 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 $689.53 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

Large cap companies typically have a market capitalization above $10 billion. Considered a more stable option, large cap companies boast more predictable cash flows and are less volatile than their mid and small cap counterparts.

Growth stocks have higher than average sales and earnings growth rates. While these are expected to grow faster than the broader market, they also have higher valuations. Additionally, growth stocks have a greater level of risk associated with them. 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

When considering an ETF’s total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

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 5.05%.

Sector Exposure and Top Holdings

ETFs offer a diversified exposure and thus minimize single stock risk but it is still important to delve into a fund’s holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.

This ETF has heaviest allocation to the Information Technology sector–about 42.20% of the portfolio. Consumer Discretionary and Healthcare round out the top three.

Looking at individual holdings, Pinduoduo Inc-Adr (PDD) accounts for about 1.16% of total assets, followed by Tesla Inc (TSLA) and Splunk Inc (SPLK).

The top 10 holdings account for about 10.64% 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 lost about -23.51% so far this year and is down about -15.69% in the last one year (as of 06/13/2022). In the past 52-week period, it has traded between $63.51 and $90.09.

The ETF has a beta of 1.05 and standard deviation of 25.99% for the trailing three-year period, making it a medium risk choice in the space. With about 103 holdings, it effectively diversifies company-specific risk.

Alternatives

Direxion NASDAQ100 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 reasonable 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 $66.77 billion in assets, Invesco QQQ has $158.08 billion. VUG has an expense ratio of 0.04% and QQQ charges 0.20%.

Bottom-Line

Passively managed ETFs are becoming increasingly popular with institutional as well as retail investors due to their low cost, transparency, flexibility and tax efficiency. They are 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 NASDAQ100 Equal Weighted Index Shares (QQQE): ETF Research Reports
 
Tesla, Inc. (TSLA) : Free Stock Analysis Report
 
Invesco QQQ (QQQ): ETF Research Reports
 
Splunk Inc. (SPLK) : Free Stock Analysis Report
 
Vanguard Growth ETF (VUG): ETF Research Reports
 
Pinduoduo Inc. Sponsored ADR (PDD) : Free Stock Analysis Report
 
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