After a three-day market rout, Wall Street rebounded in trading on Sep 9 as investors jumped in to buy beaten-down tech stocks. The move has pushed the tech-heavy Nasdaq 100 to log its best day since April. The stocks that had plunged the most in the market rout recovered the most.
Concerns about excess purchases of call options tied to the tech sector, delay in the late-stage trial of the leading COVID-19 vaccine from AstraZeneca Plc AZN, election uncertainty and a historically weak September month took a toll on the stocks. Though the combination of these factors will continue to keep the market volatile in the weeks ahead, the technology sector will gain momentum as it is currently being perceived as a defensive play (read: Nasdaq in Correction: One Solid Reason to Buy the Dip in ETFs).
This is especially true as it has shown strong resilience amid the pandemic and will likely continue its trend given the acceleration in the global digital shift for everything ranging from remote working to entertainment, and shopping. The rapid adoption of cloud computing, big data, Internet of Things, wearables, VR headsets, drones, virtual reality, artificial intelligence, machine learning, digital communication and 5G technology will provide added advantage.
Additionally, the euphoria surrounding a COVID-19 vaccine and continued support from the Fed should also offer an upside to the Nasdaq 100 stocks.
As a result, Invesco QQQ QQQ, which serves as a proxy to the index, gained nearly 3% last week. Let’s take a closer look at the fundamentals of QQQ.
QQQ in Focus
This ETF provides exposure to the 103 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. Information technology accounts for 47.6% of the assets, while communication services and consumer discretionary make up for at least 19% share each (read: Should You Invest in Tech ETFs After a Sharp Sell-Off?).
QQQ is one of the largest and most-popular ETFs in the large-cap space with AUM of $128.2 billion and an average daily volume of around 38.2 million shares. It charges investors 20 bps in annual fees. The fund has a Zacks ETF Rank #1 (Strong Buy) with a Medium risk outlook. Though most of the stocks in the fund’s portfolio have delivered strong returns in a month, we have highlighted the five stocks in the ETF that led the way higher on Sep 9 with their respective positions in the fund’s basket:
Top-Performing Stocks in QQQ
Zoom Video Communications Inc. ZM: It provides a video-first communications platform in the Americas, the Asia Pacific, Europe, the Middle East, and Africa. The stock climbed 11% on the day and accounts for 0.6% in the fund’s basket. It has an expected earnings growth rate of 545.7% for the fiscal year (ending January 2021) and a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Tesla Inc. TSLA: This company designs, produces and sells electric cars, solar energy generation systems and energy storage products. The stock surged nearly 11% on the day and has 2.9% exposure in the fund’s basket. Its earnings are expected to increase to $1.76 per share this year from 3 cents reported last year. Tesla has a Zacks Rank #3 (Hold).
NVIDIA Corporation NVDA: It is the worldwide leader in visual computing technologies and the inventor of the graphic processing unit, or GPU. The stock has a projected earnings growth rate of 56.3% for the fiscal year (ending January 2021) and has rallied 6.7%. It accounts for 2.7% of the fund’s portfolio and has a Zacks Rank #3.
Skyworks Solutions Inc. SWKS: It designs, manufactures and markets a broad range of high-performance analog and mixed signal semiconductors that enable wireless connectivity. It jumped 5.2% on the day and its earnings are expected to decrease by 6.2% for the fiscal year (ending September 2020). Skyworks has a Zacks Rank #3 (read: 7 Least-Hurt Tech ETFs in the Latest Rout).
Align Technology Inc. ALGN: This company manufactures and markets a system of clear aligner therapy, intra-oral scanners and CAD/CAM (computer-aided design and computer-aided manufacturing) digital services used in dentistry, orthodontics, and dental records storage. This stock makes up for 0.2% share in the fund’s basket and delivered returns of 4.7% on Sep 9. However, its earnings are expected to decline 59.3% for this year. The stock has a Zacks Rank #3.
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