Nasdaq 100 Index: Tech vs Ex-Tech
In 2006-2007, First Trust added a pair of products to their ETF lineup that allowed investors to delineate Nasdaq 100 exposure along sector categories, specifically Tech versus ex-Tech. The viability of these products, which total roughly $400 million in assets between the two today, speaks to the growth that the Nasdaq 100 has continued to experience through tertiary products even at the ripe old age of 31. The Nasdaq 100 inventory has evolved from the late-90s, at which point it truly was a “Technology” index, to its current composition today which includes a greater headcount of “ex-Technology” constituents. The First Trust Nasdaq 100 Technology Sector Fund QTEC launched in April 2006 with the mandate of tracking an equal-weighted basket of Nasdaq 100 components considered to fall within the broad Technology sector. Today, this fund invests in 36 such securities across the Semiconductor, Software, Internet, Computer Hardware, Computer Services, and Telecom sub-sectors. Meanwhile, the First Trust Nasdaq 100 ex-Technology Sector Index Fund QQXT invests in all the “other” Nasdaq 100 companies, holding those in an equal-weighted fashion as well. At this time, the Fund has 69 holdings and is primarily overweighted in Consumer Cyclicals and Healthcare.
Both the “Tech” and “ex-Tech” products from First Trust that seek to track Nasdaq 100 sub-indices offer positive long-term trends (see charts above), with the “Tech” fund (QTEC) currently offering a stronger fund score at 4.81. The 2% scale relative strength chart (we used a 2% scale, instead of 1%, due to the Funds having no common holdings) between the two Funds confirms that strength lies with QTEC as the Fund has maintained an RS buy signal versus QQXT since June of 2014. In fact, with recent action QTEC gave a second buy signal on the RS chart toward the end of July.