Moat Advantages Could Lift These ETFs

 

Some bright spots going into 2023 include an 8.52% recovery in the Nasdaq 100 Index (NDX). It remains to be seen how sustainable the recovery will be, but investors considering exchange-traded funds such as the Invesco QQQ Trust (QQQ) and the Invesco Nasdaq 100 ETF (QQQM), which track the Nasdaq 100, should know that. It may be reassuring. These ETFs are home to many companies that are considered moat companies.

In other words, QQQ and QQQM are chock-full of companies with strong competitive advantages. This is a trait that can lead to attractive long-term results.

“An economic moat reflects the degree to which a company has maintained a competitive advantage. Companies with an economic moat can fend off competition and enjoy high returns on investment over many years. . To determine if a company has an economic moat, Morningstar analysts look at network effects, switching costs, intangibles like patents and brand identity, cost advantages, and efficient scaling.

While the Nasdaq 100 has historically been more volatile than other broad equity benchmarks despite producing excellent returns, Hirohori stocks also benefit investors with lower volatility. Offers.

“Also, stocks with economic grooves tend to be less volatile in price than stocks without grooves. , over 10, 15 years, have shown lower volatility than narrow-moated stocks and the broader stock market, with unmoated stocks exhibiting the highest volatility as a group,” Solberg added. rice field.

Adding to the appeal of QQQ and QQQMG today is the fact that many Hirohori stocks, including several members of these ETF listings, are undervalued. Applied Materials (NASDAQ: AMAT), the name of semiconductor equipment, fits the bill undervalued. This stock represents 0.81% of the QQQ and QQQM portfolios.

Originally published at https://businessdor.com on January 24, 2023.