When it comes to equity gauges that are home to a plethora of disruptive and innovative companies, the Nasdaq-100 Index (NDX) has long been a force.
That tradition remains in place today, confirming that exchange traded funds such as the Invesco QQQ Trust (QQQ ) and the Invesco NASDAQ 100 ETF (QQQM ) are ideal avenues for investors who want to access innovative firms while eliminating the stock-picking burden. Both Invesco funds follow NDX.
The disruptive/innovative properties of these ETFs are confirmed by the funds allocating nearly two-thirds of their rosters to technology and communication services equities. At the sector level, those are two of the most innovative groups.
QQQ, QQQM Matter for Innovative Exposure
The disruptive credentials of QQQ and QQQM are rooted in tech. But it doesn’t end there and that’s a positive point for long-term investors.
“Tech companies are using disruptive technologies like artificial intelligence to analyze large, complex datasets. Research and development in the healthcare industry has created lifesaving drug therapies and treatments. And climate change is forcing energy and utilities companies to focus on renewable energy,” acc"ording to Morningstar research.":https://www.morningstar.com/stocks/best-innovative-companies-own-2023-edition
Healthcare stocks account for about 7% of the ETFs’ rosters, but many of those holdings are considered innovative companies. For example, Gilead Sciences (GILD), the second-largest healthcare component in QQQ and QQQM, made Morningstar’s list of best innovative stocks to own this year.
An array of QQQ/QQQM tech holdings also made that list. That group includes venerable names such as Dow components Cisco Systems (CSCO) and Microsoft (MSFT), indicating that the ETFs offer somewhat low-risk entries into the world of disruptive investing. That point is affirmed by the average market capitalization of $856.84 billion of the ETF’s components.
Another source of confirmation of the innovative properties of the Invesco ETFs is robust exposure to semiconductor equities. More than a dozen such names, including Broadcom (AVGO), reside in the funds.
“Going forward, we see Broadcom benefiting from moderate, steady growth from data center networking, Apple unit sales, and upselling for its software customers. We believe artificial intelligence will become a material organic driver to the networking business, as applications like large language models require advanced network switching, where Broadcom’s chips are best-of-breed. We expect acquisitions to still be on Broadcom’s radar but perhaps with larger, less frequent deal,” noted Morningstar analyst William Kerwin.
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