The Nasdaq Composite’s short-term memory of its 4.36 percent loss in 2018 is warranted given its 19.22 percent gain thus far in 2019. But the ProShares UltraPro QQQ (TQQQ ) is producing dynamite gains to remember with a 78.49 percent performance year-to-date.
The Nasdaq Composite is the best-performing index among its U.S. equities peers–the Dow Jones Industrial Average is up 10.72 percent YTD while the S&P 500 is up 14.52 percent YTD. The Nasdaq can certainly tip its hat to the tech sector, which comprises a majority of the index–tech has been a stellar performer thus far this year after getting roiled in the final quarter of 2018.
If the technology sector had to nominate an ETF spokesperson to represent the industry, it would no doubt be the Invesco QQQ Trust (QQQ ). Year-to-date, QQQ is up 23 percent as the Nasdaq Composite reached a new closing high just recently in what’s been a retribution year thus far for U.S. equities.
“Tech is one of the few S&P sectors with +50% non-U.S. revenues and profits,” wrote Nick Colas, co-founder of DataTrek Research, in a note to clients. “The exact number is 58% non-U.S. sales, the highest of any industry group. That makes it the poster child for international trade, and not just with China. Markets were hoping that a calm resolution to U.S.-China trade disputes would pave the way for other agreements.”
Add triple the exposure to QQQ and you can see why TQQQ’s gains have been explosive so far. TQQQ seeks daily investment results that correspond to three times (3x) the daily performance of the NASDAQ-100 Index.
The fund invests in securities and derivatives that ProShare Advisors believes, in combination, should have similar daily return characteristics as three times (3x) the daily return of the index. The index, a modified market capitalization-weighted index, includes 100 of the largest non-financial domestic and international issues listed on the NASDAQ Stock Market.
Tech Party Almost Over?
The tech party may be coming to an end, however, according to some analysts. Certain pockets of the tech sector may see more strength than others, such as social media stocks.
“It’s … hard to totally avoid the sector. They are going to have the greatest growth, the best margins, and in certain instances, phenomenal balance sheets,” said Quint Tatro, managing director of Joule Financial. “It’s why we like Twitter, for example, here.”
With stocks like Twitter lagging behind its peers, it could be a major player for tech moving forward.
“Look at the cycle that we’re coming into with the election and what we believe will be an incredible boost to ad sales on the Twitter platform. It’s what’s talked about constantly,” Tatro added. “We think they’re going to be a huge [beneficiary]of the ad spend and we think this is a good place to put some money in the tech sector that still has growth at a reasonable price.”
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