The Magnificent Seven stocks propelled the Nasdaq-100 Index (NDX) to a gain of 3.46% for the month ending June 12. And that gauge has risen by nearly 14% over the past 90 days. So some investors might again be worrying about valuations on large- and mega-cap growth stocks.
It’s almost impossible to find communication services and technology stocks that are credibly undervalued. But such bargains do exist. And some reside in the Invesco NASDAQ Next Gen 100 ETF (QQQJ ). The $612 million QQQJ turns five years old in October. It tracks a basket of stocks that are next in line for inclusion in the NDX.
Like that index and the corresponding ETFs, QQQJ is heavy on growth and technology stocks (it allocates nearly a third of its weight to that sector). It’s not a value fund in the traditional sense. But QQQJ is home to some tech stocks that currently sport attractive multiples.
QQQJ Has Some Value Surprises
Home to 110 stocks, QQQJ arguably holds some value surprises. That’s particularly so when considering investors’ AI-induced enthusiasm for semiconductors. Chip equipment maker Teradyne (TER) is an example of a QQQJ holding currently sporting value traits. Teradyne holds enviable relationships across the tech space. And it’s a major player in the fast-growing robotics chip market.
“We expect Teradyne to complement continued investment in chip testing with investment in the high-growth robotics market,” noted Morningstar analyst William Kerwin. “We think the firm’s collaborative and autonomous robots will augment top-line growth over the next five years, and we don’t see this segment hurting organic investment in the core chip business.”
Morningstar highlighted several other semiconductor stocks, including some NDX member firms, that are currently attractively valued. But there’s more to the QQQJ value proposition, including content delivery network giant Akamai Technologies (AKAM).
Akamai is attempting to augment its slower growth content delivery business with cloud computing, putting it in competition with some of the hyperscalers in that space, but the company could carve out a niche in that arena.
“Although competition will remain stiff, particularly as it goes up against the major hyperscalers, we think Akamai’s differentiated and distributed network, with over 4,300 points of presence, will allow the firm to capitalize on the growing demand for edge computing, mainly as 5G enhances networking capabilities at the edge of networks,” observed Morningstar’s Samuel Siampaus.
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