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Accessing innovative companies on the rise with Invesco Nasdaq Next Gen 100 ETF

Key takeaways
R&D-powered growth
1

Considerable research and development spending may prime companies included in the Invesco Nasdaq Next Gen 100 ETF (QQQJ) for high growth.

Innovation across sectors
2

QQQJ constituents operate in diverse areas of the economy, including health care, transportation, and technology.

Graduation on the horizon
3

QQQJ’s high-growth, mid-cap companies can and do grow large enough to “graduate” to be included in the Nasdaq-100 Index.

It’s understandable for investors to focus on the biggest, most successful companies, but what about the mid-cap companies whose biggest growth spurts may be ahead of them? While our flagship product, Invesco QQQ ETF (QQQ) and one of our new offerings, Invesco Nasdaq 100 ETF (QQQM), provide access to the 100 largest non-financial companies listed on the Nasdaq, Invesco Nasdaq Next Gen 100 ETF (QQQJ) offers that approach with a twist: exposure to the next 100 largest companies listed on the Nasdaq (ex-financials).

With a mid-cap focus, the companies in QQQJ are defined by their high expenditures on research and development as a proportion of revenue, which could prime them for high future growth.

Research and development spending is a key measure of a company’s commitment to innovation. Research and development can lead to new discoveries, competitive advantages, and cost-saving measures.

Chart 1
Source: Nasdaq as of Sep. 30, 2020.

QQQJ constituents in focus

Roku, Inc.

A great example of the innovative technology companies you’ll find in QQQJ, Roku has become seemingly indispensable during the COVID019 pandemic, with recent service upgrades propelling the stock higher in 20201. A deal between Roku and Comcast’s NBCUniversal was also recently announced, bringing NBCUniversal’s Peacock streaming service to the platform.

JB Hunt Transport

QQQJ’s holdings aren’t just limited to technology — investors need look no further than JB Hunt Transport for an example of the diverse sectors represented in QQQJ. One of the largest transportation logistics companies in North America2, JB Hunt Transport provides multimodal, capacity-oriented solutions to a diverse group of customers throughout the United States, Canada, and Mexico, and with more people staying home, freight transport is more important than ever.

QQQJ graduates in focus

Thanks to their high growth profiles and innovative business models, some companies may eventually “graduate” from QQQJ’s holdings, into Invesco QQQ ETF (QQQ) which provides access to the 100 largest non-financial companies listed on the Nasdaq.

DocuSign

DocuSign graduated in June 2020, and it’s easy to see why: the digital transaction and e-signature firm’s services have proven especially important during the ongoing pandemic. DocuSign’s total first quarter earnings totaled $297 million, for a 39% year-over-year increase3, and the strong earnings continued into the second quarter of 2020, growing 45% year-over-year.4

Tesla

Tesla is another innovative company that has moved on to bigger and better things. The electric vehicle manufacturer was added to QQQ on July 15, 2013 and hasn’t looked back.5 Tesla has since gone on to become the most valuable automobile manufacturer in the world6, with a market capitalization hovering around $400 billion as of Nov. 17, 20207.

The bottom line

The companies held in QQQJ offer a mid-cap focus across sectors and high growth potential, thanks in part to heavy investment in research and development. Over time, QQQJ’s constituents may graduate into QQQ, our flagship fund featuring the 100 largest non-financial companies listed on the Nasdaq Exchange.

Footnotes

  • 1

    Source: MarketWatch, Dow Jones, “Roku stock surges after company adds NBC's Peacock service to streaming platform,” Emily Barry, Sep. 21, 2020

  • 2

    Source: Transport Topics, “2020 Essential Financial and Operating Information for the 50 Largest Logistics Companies in North America,” Nov. 16, 2020

  • 3

    Source: DocuSign, “DocuSign Announces First Quarter Fiscal 2021 Financial Results,” June 4, 2020

  • 4

    Source: ZDNet, “DocuSign reports strong Q2 as revenue climbs 45%,” Natalie Gagliordi, Sep. 3, 2020

  • 5

    Source: Benzinga, “What to Expect From Tesla Shares After Joining QQQ (TSLA),” July 10 2013

  • 6

    Source: Forbes, “Tesla Is Now the World’s Most Valuable Car Company With a $208 Billion Valuation,” Sergei Klebnikov, July 1, 2020

  • 7

    Source: Business Insider, “Tesla soars as much as 13% after the automaker nabs a spot on the exclusive S&P 500 index,” Nov.17, 2020

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