00:00Good afternoon, everyone. My name is Alexis Maxwell. I'm an equity analyst with Bloomberg Intelligence,
00:05and I'm delighted to have Tim McLaughlin back up with us on stage.
00:10A couple of questions here as we transition into our next session.
00:14So, Tim, as a quick reminder, can you tell us what Invesco QQQ is?
00:20Sure. Invesco QQQ is an ETF which tracks the NASDAQ 100 index.
00:25So, the NASDAQ 100 index and, by effect, QQQ are comprised of the largest 100 non-financial companies listed on the NASDAQ stock exchange.
00:35So, we think the resulting exposure is something that gives you access in a single-ticker solution to some of the largest and most innovative companies in the world.
00:45By way of AUM, or assets under management, QQQ at roughly $413, I think I saw last close, $413 billion.
00:53is the fifth largest ETF globally.
00:58It's also the second most actively traded ETF in the world.
01:04It boasts a 26-plus-year track record, so it's one of the oldest ETFs on the street.
01:10And I think, in a way, it's kind of innovative in itself based on just that long track record
01:16and really launching in the nascent stages of the ETF industry.
01:20Thanks, Tim.
01:22With that track record, then, in today's rapidly changing economy, how are the holdings within QQQ adapting and evolving to keep pace with current trends?
01:33So, you know, we talk a lot about innovation in the context of Invesco QQQ.
01:37And one of the things that comes up is, like, well, how do you quantify that?
01:42And how we like to quantify it at Invesco is through research and development, or R&D.
01:46And if you look at the weighted average spend from a research and development standpoint of a QQQ company
01:53versus something like the S&P 500, you know, similar stack-up, right?
01:58The weighted average spend from an R&D standpoint of those companies, what you see is a significantly higher spend for QQQ companies.
02:06So I think it's as of the end of last year, the average was $17.7 billion for a QQQ company versus roughly $12.7 billion for an S&P 500 company.
02:19So you have a 1.4x multiple above that of the S&P 500, if you look at it from an R&D standpoint.
02:27That's pure dollar.
02:28But the thing is, as the Qs have grown and as tech has obviously gone on a significant run in the past decade plus,
02:37what you see is a growing proportion of companies that are sitting within QQQ that are now represented within the S&P 500.
02:44So it's roughly 85 companies or so that are in both indexes.
02:50And if you were to strip out those companies, those 85 or so from the S&P 500,
02:55and look at the R&D of the S&P X QQQs companies, what you see is that drops significantly,
03:02and that multiple jumps up dramatically.
03:03I think the R&D on the S&P 500 goes down to, you know, something like $1.4 billion as far as average spend.
03:10So we like to think of innovation, again, in the context of that R&D.
03:16And really just kind of it's ingrained the commonality we see across Q's companies is the commitment to reinvest in themselves
03:25and really drive things forward.
03:29And you can't innovate.
03:30You can't stay ahead of the curve without investing.
03:33I think a lot of these companies we've seen have also, they look a lot different than they did, you know,
03:41from even 5, 10, 20 years ago, right?
03:44Amazon, being an example, started off as an online book retailer,
03:48and now it's, you know, a hyperscaler as far as AI data center is concerned,
03:53obviously with a huge retailing business as well.
03:56But these are companies that are nimble and have been able to diversify their core business segments.
04:02One last question, then.
04:05When it comes to investing in emerging technologies, where is QQQ shining outside of the technology sector?
04:12Yeah, so one of the biggest misconceptions we come across as far as QQQ is concerned is that it's a tech fund, right?
04:18You know, if tech is up, Q's are up.
04:21And, you know, there's definitely truth in that because it is tech heavy.
04:24If you look at an ICB classification standpoint, it's roughly 64% of the portfolio is within technology.
04:31If you look GIX, it's somewhere around 55.
04:34But you do have a significant portion of the portfolio that really falls outside of technology.
04:40And I think what we've seen in this day and age, right, is there's a lot of intersection across industry, right,
04:47where you have pure technology companies, but you have a lot of companies that are not pure technology companies
04:53that are really tech-centric in a lot of different ways.
04:57So we've commissioned – or we've worked with NASDAQ, our index provider,
05:02to provide some research around patent filings of the QQQ companies.
05:08And what we've seen across roughly 30 disruptive areas of technology is that you have significant representation of QQQ companies
05:17over the last year filing patents in those areas.
05:20And you see the ones that are associated typically with AI, right, natural language processing, big data, even cybersecurity.
05:27But what you do see is differentiated exposure in sectors like healthcare, right?
05:31So filings in robotic surgery, nanorobotics, bioinformatics.
05:38You also see things like nuclear power and nuclear energy coming into the fold and representation there.
05:44So we think that QQQ really is a good solution as far as a core holding and a diversified portfolio
05:51as far as large-cap growth is concerned or even a satellite holding
05:54if you're trying to get exposure to some of these companies that are driving innovation.
05:58And, you know, I think the fundamentals have really supported kind of the mentality around R&D
06:07and driving that innovation forward when you've seen significant growth rates
06:12on a 10-year CAGR standpoint.
06:15Both sales and earnings are significantly higher for QQQ than they are compared to not only the S&P 500
06:22but Russell 1000 growth.
06:25Well, Tim, thank you for your time and support for the event today.
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