ProShares Nasdaq-100 Dorsey Wright Momentum ETF (QQQA)

Overview of ProShares Nasdaq-100 Dorsey Wright Momentum ETF (QQQM)

Profile

Investment Focus: The ProShares Nasdaq-100 Dorsey Wright Momentum ETF (QQQM) tracks the Nasdaq-100 Dorsey Wright Momentum Index, which comprises 100 of the largest non-financial companies listed on the Nasdaq Stock Market with a strong record of price momentum. The index focuses on strong, long-term price growth and is rebalanced quarterly.

Asset Allocation:

• Equities: 100%
• Sectors: Technology (40%), Consumer Discretionary (20%), Health Care (20%), Communication Services (10%), Industrials (5%), and others (5%)

Investment Strategy:

• Employs Dorsey Wright's proprietary Relative Strength Momentum (RSM) scoring system to select stocks
• RSM score considers a combination of price momentum, trend strength, volatility, and volume
• Higher RSM score indicates stronger momentum and potential for further price growth

Objective

The primary objective of QQQM is to provide investment results that closely track the Nasdaq-100 Dorsey Wright Momentum Index. This means aiming to replicate the performance of the selected high-momentum Nasdaq-100 companies.

Issuer

ProShares:

• A leading provider of exchange-traded funds (ETFs) with over $80 billion in assets under management
• Known for innovative and thematic ETFs
• Strong reputation for ETF quality and customer service

Market Share

QQQM has a relatively small market share within the Nasdaq-100 ETF space, representing a niche offering focused on momentum investing.

Total Net Assets

Approximately $730 million as of October 26, 2023.

Moat

• Unique Strategy: The Dorsey Wright Momentum Index offers a differentiated approach within the Nasdaq-100 ETF space by prioritizing momentum stocks.
• Experienced Management: ProShares has a proven track record in managing thematic ETFs and a dedicated team of analysts and portfolio managers.
• Focus on Technology: QQQM's focus on the technology sector provides exposure to a high-growth and innovative area of the market.

Financial Performance

Historical:

• Since its inception in December 2017, QQQM has outperformed the broader Nasdaq-100 index on a cumulative basis.
• However, it experienced a significant drawdown during the 2022 market downturn.

Benchmark Comparison:

QQQM has outperformed the Nasdaq-100 index in terms of total return since its inception, but underperformed in the past year. This indicates that the momentum strategy may be more effective in certain market conditions.

Growth Trajectory

The growth trajectory of QQQM will depend on several factors, including:

• Performance of the underlying stocks: The ETF's performance is directly tied to the momentum of the selected Nasdaq-100 companies.
• Market conditions: Momentum investing tends to outperform in bull markets but underperform in bear markets.
• Investor demand for thematic ETFs: Increasing interest in thematic investing could benefit QQQM.

Liquidity

• Average Daily Trading Volume: ~$10 million
• Bid-Ask Spread: ~$0.01

QQQM has sufficient liquidity for most investors, although the trading volume is relatively lower compared to broader market ETFs.

Market Dynamics

Factors affecting QQQM include:

• Technology sector performance: The ETF's holdings are heavily concentrated in the technology sector, making it sensitive to technology-related news and events.
• Momentum investing sentiment: Investor appetite for momentum strategies can influence the performance of the ETF.
• Overall market volatility: QQQM may experience higher volatility compared to broad market ETFs.

Competitors

Key competitors and their market shares:

• Invesco QQQ Trust (QQQ): 94.5%
• iShares Nasdaq-100 ETF (QQQ): 4.5%
• First Trust Nasdaq-100 Equal Weight Index ETF (QQEW): 0.5%

Expense Ratio

 0.65% per year. This includes management fees and other operational costs.

Investment Approach and Strategy

• Strategy: Tracks the Nasdaq-100 Dorsey Wright Momentum Index, which selects stocks based on their momentum scores.
• Composition: Holds the top 100 stocks from the Nasdaq-100 index with the highest RSM scores.
• Rebalancing: Rebalances quarterly to maintain alignment with the underlying index.

Key Points

• Leverages momentum strategy to invest in high-growth Nasdaq-100 stocks.
• Managed by ProShares, a reputable ETF provider.
• Relatively small market share but offers a differentiated approach.
• Has outperformed the Nasdaq-100 index historically but experienced drawdowns.
• Suitable for investors seeking exposure to high-growth, momentum-driven stocks.

Risks

• Market Volatility: High volatility in the technology sector can lead to significant price fluctuations.
• Momentum Investing Risk: Momentum strategies may underperform in certain market conditions and carry higher volatility.
• Concentration Risk: Focus on the technology sector exposes the ETF to sector-specific risks.

Who Should Consider Investing

• Investors seeking exposure to high-growth Nasdaq-100 stocks.
• Investors with a higher risk tolerance.
• Investors who believe in the effectiveness of momentum investing strategies.

Fundamental Rating Based on AI

Rating: 7 out of 10

Justification:

• QQQM offers a unique strategy within the Nasdaq-100 ETF space and has a strong track record compared to its benchmark.
• ProShares is a reputable issuer with a strong team of analysts managing the ETF.
• However, the relatively small market share and high expense ratio compared to some competitors are factors to consider.

Resources and Disclaimers

• ProShares website: https://www.proshares.com/etfs/qqqm
• Nasdaq-100 Dorsey Wright Momentum Index Methodology: https://www.dorseywright.com/etfs/momentum-etfs/nasdaq-100-etf-methodology/

Disclaimer: This information is for educational purposes only and should not be considered financial advice. Please consult with a professional financial advisor before making any investment decisions.