Is QQQ Stock A Buy Right Now? Here's What Earnings, Charts Show (2024)

Looking for a high-growth stock with huge potential — especially as technology stocks get pounded? Apple stock or Microsoft? Amazon.com or Facebook? Why choose? Own them all.

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QQQ stock, or the Invesco QQQ Trust (QQQ), puts the 100 most-important Nasdaq stocks into your portfolio in one trade. Best of all, it leaves out financials, focusing your portfolio on companies in faster-growing sectors. The QQQ a low cost way to own the companies building the future economy.

And rather than trying to pick the right tech stock to buy and when to buy it, place one trade and you own them all right now.

All this at a rock-bottom fee of just 0.2% a year. Following a commission war launched in 2019by Charles Schwab (SCHW), Interactive Brokers (IBKR) and TD Ameritrade (AMTD), you can buy this fund for no commission. That means you pay just $20 a year for every $10,000 invested.

How do you get on board?

What Is QQQ Stock?

QQQ stock is the fifth most-popular exchange-traded fund in the world, holding more than $160 billion in investors' assets. It tracks the Nasdaq-100 index, which owns the most valuable nonfinancial stocks on the Nasdaq. QQQ is also the largest ETF that tracks a narrower slice of the stock market. The largest ETF is the broad SPY stock, which owns all the stocks in the S&P 500.

But while the QQQ stock isn't a broad market ETF, it owns the most valuable stocks trading on the Nasdaq. That definition means the QQQ is very tech heavy. Most of the world's biggest technology stocks still trade on the Nasdaq. And given that technology continues to be the top-performing sector, giants like Microsoft (MSFT) and Apple (AAPL) plus tech-adjacent Amazon.com (AMZN) only get more important in the ETF.

What Are The Top 10 Holdings In QQQ Stock?

QQQ stock is heavily tilted to megacap tech stocks. All of its top 10 holdings are technology or tech-related companies like Amazon.com.

CompanySymbolWeight in QQQ Stock
Microsoft (MSFT)12.63
Apple (AAPL)12.60%
Alphabet (GOOG)7.4%
Amazon (AMZN)6.3%
Nvidia (NVDA)5.3%
Meta Platforms (META)3.7%
Tesla (TSLA)3.4%
Broadcom (BRCM)2.0%
PepsiCo (PEP)2.0%
Costco Wholesale (COST)1.7%
Source: Invesco as of April 20, 2023

Why Is The Nasdaq 100 Better Than The Dow Jones?

The Nasdaq 100 isn't as famous as the Dow Jones Industrial Average, but it's superior in many ways, including because it is:

  • Broader:The Nasdaq holds 100 stocks to the Dow Jones' 30 holdings.
  • More fully representative of the big market leaders. The Nasdaq 100 gives greater weight to companies with the most value trading in the market. This is arguably a superior method to the Dow's. The Dow weights stocks based on their per-share prices. This makes no logical sense.
  • More rules-based.The Nasdaq 100 relies less heavily on human intervention. Changes are made to both the Dow and Nasdaq 100 as stocks are put in and taken out. Humans choose what's in the Dow and when changes are made. But since the Nasdaq 100 owns all large Nasdaq stocks, there is no judgment in what goes in and what comes out each year.
  • A better performer: Perhaps most importantly, the Nasdaq 100 blows away the Dow in terms of gains. QQQ stock returned 13.2% annually over the past 15 years, which includes dividends. The SPDR Dow Jones Industrial Average ETF (DIA) returned only 9.0% annually during that time. And over the past five years, the QQQ returned 13.9% annually, topping the 9.7% return by the Dow.

What Is An ETF?

ETFs, created more than 25 years ago, are now among the fastest-growing investment vehicles in the world. Like mutual funds, ETFs are investments that own a bucketful of other investments.

And ETFs can own everything from individual stocks, like QQQ does, to bonds, commodities and currencies. Nearly all ETFs own the investments dictated by an index. QQQ stock owns the stocks in the Nasdaq-100.

But other ETFs own stocks in other indexes such as small stocks and midsize stocks. You can also buy ETFs that only own growth stocks or beat-up stocks called value stocks. Some ETFs only buy stocks held inspecific sector indexes, such as information technology or utilities.

And there also more exotic ETFs. Some "inverse ETFs" rise in value when the market falls. And some own commodities like gold or silver.

Is QQQ Stock A Buy Right Now? Here's What Earnings, Charts Show (1)

What Are The Top Sectors In QQQ Stock?

Technology and communications stocks dominate QQQ stock, accounting for more than two-thirds of the index. That heavy sector concentration is a risk. The QQQ will suffer much more than the S&P 500 if tech stocks correct.

SectorWeight in QQQ Stock
Information Technology49.2%
Communication Services16.5%
Consumer Discretionary14.6%
Health Care6.5%
Consumer Staples6.0%
Industrials, utilities and energy6.0%
Other1.2%
Source: Invesco as of April 20, 2023

What Other Options Are There? How Much Do They Cost?

Investors have choice when looking at buying the Nasdaq 100.

Investors can now own all the same stocks on the Nasdaq 100 at a much lower fee with a new ETF. It's the Invesco Nasdaq 100 ETF (QQQM). Like the Invesco QQQ Trust, it owns all 100 of the largest non-financial companies on the Nasdaq. But it does it for 0.15% a year, or 25% less than the 0.2% the QQQ charges.

The First Trust Nasdaq-100 Equal Weighted Index Fund (QQEW) owns all 100 nonfinancial stocks on the Nasdaq, too. But unlike QQQ stock, the QQEW owns all 100 stocks equally, rather than weighting them based on their value. The First Trust Nasdaq-100 Equal Weighted Index ETF is smaller than QQQ stock, with assets of $1.4 billion, and charges more (0.58%).

The Direxion Nasdaq-100 Equal Weighted Index (QQQE), like QQEW, owns equal weightings in all stocks in the Nasdaq 100, too. It's smaller, $438 million, but cheaper with an annual expense ratio of 0.35%.

Does QQQ Stock Pay Dividends?

Few people buy tech stocks with the goal of dividends, but an increasing number of these stocks pay dividends. Apple and Microsoft are decent dividend payers, now. But these dividends are a drop in the bucket as a majority of Nasdaq 100 stocks pay no dividend. Overall, QQQ stock's dividend yield is just 0.7%, or less than half the yield of the S&P 500.

QQQ Stock Technical Analysis— Is It A Buy Now?

If you want to own leading Nasdaq companies, it's tough to beat QQQ. The ETF has vigorous buying and selling during the day, keeping the price you'd get for selling close to the price you pay to buy.

On the other hand, some investors use QQQ stock more tactically. They dart in and out to catch market movements. If you're this type of investor, you'll need to pay closer attention to technical action in the broad market. These investors look for the QQQ to push past their 50-day moving average. And that's 305.85 on April 20. It's only 3.6% higher now, so it's now time to think about buying.

It's also important for QQQ to stay above its 21-day exponential moving average. A 10-day simple moving average (SMA) can be too tight and a 50-day simple moving average too loose. IBD Charts do not include the 21-day line. OnLeaderboardcharts, the 21-day line in drawn in green. Subscribers toMarketSmithcan set up custom moving averages.

IBD's Market Pulsewill tell you if the market is in a confirmed uptrend and if now is a good entry point. AndStock Market Today shows you breaking trends in the market that will tell you if you should be in QQQ in the short term, or out. And don't miss this IBD webinar showing you how to trade QQQ like the pros.

Conclusion

QQQ stock is a great option for investors who want to make sure they don't miss out on the next Amazon or Google. When leading Nasdaq stocks get big, they land on the QQQ. This is a low-fuss way to own a diversified basket of hot stocks.

Check out IBD Stock Lists and other IBD content to find dozens more of thebest stocks to buy or watch.

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As a seasoned financial analyst and investment enthusiast, I have a comprehensive understanding of the topics covered in the article. My expertise is evident in the following breakdown of concepts mentioned:

  1. XQQQ Stock (Invesco QQQ Trust - QQQ):

    • This exchange-traded fund (ETF) comprises the 100 most important Nasdaq stocks.
    • The portfolio excludes financials, focusing on faster-growing sectors.
    • Offers a cost-effective way to own companies in the future economy.
    • Features a low expense ratio of 0.2% per year.
    • Following a commission war in 2019, it can be bought without a commission.
  2. Top 10 Holdings in QQQ Stock:

    • The QQQ stock is heavily tech-oriented, with top holdings including Microsoft (MSFT), Apple (AAPL), Alphabet (GOOG), Amazon (AMZN), Nvidia (NVDA), Meta Platforms (META), Tesla (TSLA), Broadcom (BRCM), PepsiCo (PEP), and Costco Wholesale (COST).
  3. Comparison with Dow Jones Industrial Average:

    • The Nasdaq 100 is broader, holding 100 stocks compared to the Dow Jones' 30 holdings.
    • It is more representative of market leaders and uses a more logical weighting system.
    • The Nasdaq 100 is more rules-based and has historically outperformed the Dow in terms of gains.
  4. ETFs (Exchange-Traded Funds):

    • ETFs are investment vehicles that own a diversified portfolio of other investments.
    • QQQ stock is an ETF that tracks the Nasdaq-100 index, owning stocks in the Nasdaq.
    • ETFs can include various asset classes like stocks, bonds, commodities, and currencies.
    • Some ETFs focus on specific sectors, market caps, or investment strategies.
  5. Top Sectors in QQQ Stock:

    • Technology and communications stocks dominate QQQ, accounting for over two-thirds of the index.
    • The sector concentration poses a risk if tech stocks correct.
  6. Alternative ETF Options:

    • Investors can choose alternative ETFs like Invesco Nasdaq 100 ETF (QQQM), First Trust Nasdaq-100 Equal Weighted Index Fund (QQEW), and Direxion Nasdaq-100 Equal Weighted Index (QQQE) with varying fees and strategies.
  7. Dividends and Yield:

    • QQQ stock's dividend yield is 0.7%, with most Nasdaq 100 stocks paying no dividends.
    • Some tech stocks within QQQ, like Apple and Microsoft, are decent dividend payers.
  8. Technical Analysis for QQQ Stock:

    • Investors can use technical analysis, such as moving averages, to assess QQQ stock's buy signals.
    • Mention of the 50-day moving average and the importance of staying above the 21-day exponential moving average.
  9. Conclusion:

    • QQQ stock is presented as a low-fuss way to own a diversified basket of hot stocks, making it an attractive option for investors looking for exposure to leading Nasdaq companies.

In summary, the article provides a detailed overview of QQQ stock, its composition, advantages over other indices, alternative ETF options, dividend considerations, and technical analysis for potential investors.

Is QQQ Stock A Buy Right Now? Here's What Earnings, Charts Show (2024)

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