Quizzing QQQ For Technology Investments

Technology's importance in everyday life and commerce is reflected in the investment world. For example, the sector is by far the largest in the S&P 500, outpacing second-place financial services by 670 basis points.

QQQ And Technology

Predictably, the NASDAQ-100 Index and its exchange traded fund proxy, the PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ: QQQ), feature more substantial allocations to technology stocks. QQQ's technology sector weight is currently just over 57 percent, more than two and a half times its weight to consumer discretionary, the ETF's second-largest sector allocation.

Home to $43.1 billion in assets under management, QQQ turns 18 next month and remains one of the largest broad market ETFs trading in the U.S. QQQ is also a favored ETF for investors looking for exposure to bellwether stocks such as Apple Inc. (NASDAQ: AAPL) and Amazon.com, Inc. (NASDAQ: AMZN). Those two stocks combine for about 17.5 percent of QQQ's weight.

QQQ, More Than Just Apple And Amazon

“Beyond Apple, Amazon is carving its way into several non-tech sectors as well. Since first emerging as a promising online book seller in 1994, Amazon launched its initial public offering at $1.50 (split-adjusted) in 1997 and, today, with its per share price above $750, its bookstore business is complemented — and may one day be dwarfed — by Amazon’s growing business lines in traditionally non-tech sectors. In fact, Amazon was the fourth-largest apparel retailer and had the sixth-largest television production budget in the US in 2016,” said PowerShares in a recent note.

QQQ is actually home to 107 stocks, not 100, because the NASDAQ-100 allows for the entry of multiple share classes of one stocks. Google parent Alphabet Inc. (NASDAQ: GOOG) (NASDAQ: GOOGL) is an example of that theme. QQQ has also become a favored destination for retail investors looking for exposure to a broad swath of triple-digit stocks. Including Apple and Amazon, five of QQQ's top 10 holdings sport triple-digit price tags.

Although NASDAQ stocks are often seen as growth stocks, six of QQQ's top 10 holdings, including Apple, are dividend payers and growers. Additionally, the ETF's price-to-earnings ratio of just over 20 indicates investors do not need to take on alarming valuation to embrace QQQ's growth appeal.

“For investors looking to take advantage of technological themes, it’s important to consider the way technology companies and trends are breaking down the walls of the broader economy. Market uncertainty still exists, especially given the new administration in the US, concerns about global growth and potential interest rate increases. Nonetheless, technological innovation continues to surge, and investors are being forced to reconsider what it means to invest in technology today,” added PowerShares.