5 Beaten-Down Stocks Of Nasdaq ETF With Upside Potential

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The tech-heavy Nasdaq Composite Index has turned from an outperformer to a laggard. This is especially true as the broad technology sell-off lately eroded all the gains made this year and sent the index into red. In fact, the Nasdaq is down nearly 10.6% from its February peak, signaling that it hit the correction territory.

The plunge was the result of a spike in Treasury yields, which led to fears of overvaluation in the tech stocks after an astounding performance during the pandemic. The technology sector has eroded about $1.5 trillion in less than a month. This is especially true as the sector relies on easy borrowing for superior growth and its value depends heavily on future earnings. Thus, a rise in long-term yields lowers the present value of companies’ future earnings. The 10-year yield, which began in 2021 at 0.930%, hit a high of 1.614% on Feb 25 and is currently hovering around 1.60%.

In fact, the S&P 500 Information Technology Sector Index has been down 8.2% over the past month. The other sector with the largest exposure to the Nasdaq Index — consumer discretionary — is also beaten down badly in the tech rout. The S&P 500 Consumer Discretionary Sector Index declined 9.8%.

As a result, Invesco QQQ (QQQ - Free Report, which serves as a proxy to the index, also entered into a correction territory, dropping 13% from its February peak. Let’s take a closer look at the fundamentals of QQQ.

QQQ in Focus

This ETF provides exposure to the 102 largest domestic and international non-financial companies listed on the Nasdaq by tracking the Nasdaq 100 Index. Information technology accounts for 47.7% of the assets while communication services and consumer discretionary make up at least 18% share each.

QQQ is one of the largest and most popular ETFs in the large-cap space with an AUM of $143.3 billion and average daily volume of 37.2 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.

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Disclosure: Zacks.com contains statements and statistics that have been obtained from sources believed to be reliable but are not guaranteed as to accuracy or completeness. References to any ...

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