Why the Invesco QQQ ETF Tech Bloodbath is a Buying Opportunity

It goes without saying that market selloffs never feel particularly good for investors. The ongoing slide in tech stocks continues, with the Nasdaq index down 12% from its all-time high. However, newer investors and those investing in the long term can have a good opportunity to add great names to their portfolios at discounted prices, which benefits them in the long run. One great example during the current tech sell-off is the Invesco QQQ Trust (QQQ) ETF, now down 12.9% from its all-time high and 7.5% lower year-to-date.

Following the sharp decline, I’m bullish on the Nasdaq-tracking ETF based on its stellar long-term track record, diversified portfolio of blue-chip growth stocks, and reasonable expense ratio. As an added bonus, while things have been painful in the short term, Wall St. analysts forecast a potential upside of almost 30% for QQQ over the next 12 months. 

With over $300 billion in assets under management, QQQ is today’s fifth-largest ETF in the stock market. The fund, launched in 1999, tracks the Nasdaq-100 (NDX) index, providing investors access to the 100 largest non-financial companies listed on the Nasdaq. Because of the Nasdaq-100’s tech—and growth-centric nature, the fund skews towards large-cap growth and tech stocks, although this isn’t its explicit strategy.  

Invesco’s Stellar Long-Term Results

When looking at QQQ’s long-term track record, it’s easy to see why both retail and institutional investors love this fund. Over the past year, Invesco QQQ has delivered 443% greater returns than the S&P 500. Therefore, despite QQQ being down 10% this month, its past performance demonstrates that any sell-offs tend to be decent buying opportunities, allowing investors to gain exposure to a proven fund with stable returns at lower prices. 

At last month’s close, QQQ reported a three-year annualized return of 14.4%. Moreover, the fund has posted a stellar five-year annualized return of 20.6% and an impeccable 10-year annualized return of 17.6%. These remarkable returns mean that it has beaten the broader market over each of these time frames — for comparison, the SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 (SPX), posted strong annualized returns of 12.4% over the past three years, 16.6% over the past five years, and 12.8% over the past 10 years. These are strong returns but still trail those of QQQ over each time horizon. 

Invesco QQQ’s Long Game

Let’s also look at QQQ’s performance from a cumulative perspective to illustrate its appeal to long-term investors. As of February 28, QQQ generated a cumulative three-year return of 49.5%, meaning an investor who put $10,000 into the fund three years ago would have $14,950 three years later. Going out even further, the results are even more pronounced. QQQ’s five-year cumulative return stands at an even more impressive 155%, so an investor putting $10,000 into QQQ five years ago would have an investment worth $25,497 five years later. On a ten-year horizon, QQQ’s phenomenal cumulative return of 407.4% means that an investor putting $10,000 into QQQ 10 years ago would have a position worth over $50,000 today.

Moreover, Invesco’s ETF pays dividends and offers a modest 0.6% dividend yield, albeit below the sector average of 1.2%. Most recent reported figures indicate that the QQQ ETF pays $0.83 in dividends per share.

While past performance does not guarantee future results, QQQ has established itself as a long-term winner and an investment that has consistently beaten the broader market and generated significant wealth for its investors over a long time horizon. That makes it easy to see why the current weakness over the past month should be considered a buying opportunity for long-term investors.   

Blue-Chip Growth Backs QQQ Reliability

QQQ currently holds 101 stocks, giving fund participants instant diversification into a broad group of the most extensive non-financial stocks listed on the Nasdaq exchange. Its top 10 holdings make up just under 50% of its assets. 

QQQ’s top 10 holdings feature some of the market’s biggest and best-known names, whether magnificent-7 stocks like Apple (AAPL), Nvidia (NVDA), and Amazon (AMZN) or other powerhouses like Costco (COST) and Netflix (NFLX). These blue-chip growth stocks represent many of the world’s best and most innovative companies, making them an attractive proposition for long-term shareholders.

As an added bonus for long-term investors and those just starting a position now, many of these names are considerably cheaper and trading at lower prices than just a few weeks ago. For example, Alphabet (GOOGL) trades in correction territory, down 19.9% from its 52-week high, and trades at a below-market multiple of just 18.5x forward earnings estimates. Similarly, while skeptics have questioned Nvidia’s expensive valuation over the past few years, the stock is now down 30% from its 52-week highs and trades at an incredibly reasonable valuation of just 23.8x forward earnings estimates.   

A Reasonable Cost to Acquire QQQ ETF

QQQ maintains an expense ratio of 0.20%, meaning an investor will pay $20 in fees on a $10,000 investment annually, which isn’t bad, especially given QQQ’s strong performance. While this is a bit more expensive than some broad-market ETFs, it’s well below the average expense ratio for all ETFs, which is 0.57%, according to State Street. Assuming that the ETF returns 5% per year going forward, the investor putting $10,000 into QQQ would pay $113 in fees over five years and $255 in costs over a 10-year time horizon. 

Is QQQ Stock a Buy, According to Analysts?

QQQ earns a Moderate Buy consensus rating based on 89 Buys, 13 Holds, and zero Sell ratings assigned in the past three months. The average analyst QQQ price target of $605.31 implies a 28.3% upside potential from current levels over the next twelve months.

Long-Term Pay Off Starts With a Single Trade

Market selloffs are never fun in the short term. But newer investors and investors with a long-term time horizon can be a blessing in disguise, as they offer a chance to add strong investments like QQQ to their portfolios at significantly lower price points. Many investors and individuals on the sidelines have been wishing they had bought these stocks earlier or when they were cheaper, so the present situation seems like a good chance to do just that.

I remain firmly bullish on QQQ based on its exemplary performance over the years, its portfolio of blue-chip growth stocks, and its moderate expense ratio. While the market could still head lower from here in the short term, investors who look past short-term pain and take advantage of fearful sellers will be thankful in the long term.   

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