In investing, the saying “past performance is not a promise of future return” isn’t just legal speak for fund issuers. It’s advice worth remembering — after all, no one can predict the future.
Still, one shouldn’t ignore what an active manager or passive exchange traded fund has done in the past. With that in mind, it’s worth noting that the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ) have enviable history as value creators for investors.
QQQ debuted in March 1999 and was joined by QQQM, the lower fee alternative, in October 2020. The two Invesco ETFs track the Nasdaq 100 Index (NDX), which is heavily allocated to some of the top value-creating stocks of the past decade.
QQQ: Winners Reside Here
Morningstar analyst Amy Arnott recently analyzed the top 15 value creators of the past decade based on changes in market capitalization and dividends paid. The result: the top eight stocks on that list were all NDX members over that time, and all eight are members of the QQQ/QQQM portfolios today.
Led by Nvidia (NVDA), all seven of the magnificent seven appear on her list. Semiconductor giant Broadcom (AVGO) is the sole outlier. Seven of those names hail from the technology or communication services sectors, which combine for two-thirds of the QQQ/QQQM rosters.
The stocks on my list created an estimated $20.8 trillion in shareholder wealth over the past 10 years,” noted Arnott. “That’s more than 4 times my estimate of about $4.6 trillion for the top 15 funds. Owning shares in an individual stock is a lot riskier than owning a broadly diversified fund, and the odds of experiencing a loss are much higher. However, if you manage to invest in a profitable stock, the upside can be much greater.”
As Arnott pointed out, there’s a commonality among the 15 leading value creators of the past decade. All 15 fit the bill as wide moat companies. QQQ and QQQM provide investors with efficient access to a broad group of firms with significant competitive advantages. This trait has proven to reward investors over the long-term. Finding such a high concentration by weight of wide moat firms is impressive; that designation is hard to come by.
“Only roughly 20% of the companies we cover have a wide Morningstar Economic Moat Rating, while about 40% have a narrow moat, and the remaining 40% have no moat,” added Arnott. “However, 12 of the top 15 wealth-creating stocks have wide economic moat ratings based on our analysts’ assessments, while the remaining three have narrow moats. In other words, economic moats have been key to shareholder value creation.”
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