PowerShares QQQ Trust, Series 1 (ETF) (QQQQ)

Commonly knows to the world as Cubes, it is the most popular ETF that trades the maximum with a market capitalization of approximately $19 billion. The fund has been considered the darling of the short-term traders and speculators that has resulted in it having the highest standard deviation amongst its large cap peers. NASDAQ 100 Index Tracking Stock is based on the Nasdaq-100 Index that includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq Stock Market.


Whereas a normal growth fund would dedicate about 20% towards the technology sector the allocation of this ETF is very much skewed towards the technology sector accounting for about 60% of the holding. There has been a slower growth rate in IT spending for the first half of 2007 due to seasonal factors and a slowing global economy, which doesn’t favor the software industry. Pricing pressures continue to hurt the profit margins of the hardware industry and PC sales are expected to drop in 2007. Internet related services remain a bright spot supported by the projected increase in online advertising revenues. Storage and related peripheral devices would benefit from the rising amount of data that needs to be processed and stored effectively. There is nothing much to expect from the recently launched Windows Vista and the scenario is expected to change in the later half of 2007.


The fund does not offer much diversification with the remaining 40% dominated by the consumer discretionary and health care. Despite being a large cap it has no allocation in financial sector with negligible interest in the much-sought health and energy sector. There is no consistency in the performance of the fund with certain quarters having extra ordinary results but its year-on-year performance over a period of time trails majority of its peers. Inventory congestion, stock option granting scandal add further worries resulting in lack of investor enthusiasm towards the technology sector. Signs of recession have set in and inflation continues to haunt the U.S. economy, considering it better to avoid the ETF in 2007.