Much has changed about the trajectory of the reader’s choice for InvestorPlace.com’s best ETFs contest. In the last update, the Invesco QQQ Trust (NASDAQ:QQQ) was down 16% from the start of the year. The exchange-traded fund is now back in the green, up 15% from Jan. 1 — greatly exceeding the year-to-date performance of the S&P 500.
So what changed for QQQ?
As I predicted, much of the strength in the QQQ ETF came from its “inclusion of communications services stocks like Facebook (NASDAQ:FB), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) and Netflix (NASDAQ:NFLX).” These holdings “ensure its viability amid growing social distancing initiatives.”
Communications stocks such as Netflix and Facebook have held steady in 2020, and in some cases have in fact charted significant rises over the past six or so months. While many industries have suffered great losses this year, QQQ’s heavy focus on communications and tech stocks such as Microsoft (NASDAQ:MSFT) and Nvidia (NASDAQ:NVDA) has helped it succeed where other stocks and funds have faltered.
Why QQQ Is Among the Best ETFs in 2020
The success of much of its holdings was inevitable with or without the coronavirus crisis thrown into the mix. Those pre-pandemic factors are a huge part of why InvestorPlace.com readers chose QQQ to be one of the best ETFs this year.
It has had the great benefit of holding companies that are leading our development in technological advancements like AI and the cloud — developments that were already poised for big gains on the back of secular macrotrends, regardless of the pandemic.
But the coronavirus has certainly propelled some of QQQ’s other holdings. For example, video game stocks might not have enjoyed as much success this year without the pandemic affecting our lives in such a short time frame. The fund’s key video game holdings, Electronic Arts (NASDAQ:EA) and Activision-Blizzard (NASDAQ:ATVI), are each up 21% and 29%, respectively. In fact, the entire gaming industry has enjoyed groundbreaking success amid stay-at-home initiatives, as many around the world picked up the hobby to enjoy risk-free socialization and at-home entertainment.
Expect More Success in the Long Run
One thing is clear to me: As long as the market retains some semblance of sanity, we should expect QQQ ETF to continue its upward trajectory. While it might not defeat the current leader in the best ETFs contest — the Global X Cloud Computing Fund (NASDAQ:CLOU) — it certainly has plenty of holdings that have proven themselves plenty durable in the post-Covid-19 market.
It’s possible that a second wave of coronavirus could put a dent in the fund’s recent gains, but outside of that or another major market shakeup, I think QQQ is likely to continue its recovery.
Even if 2020 proves to be a bust, there’s still reason to believe in the fund’s long-term potential. QQQ holds so many tech behemoths that are at the center of our hyper-connected world, it’s nearly impossible to imagine this fund not succeeding.
Also consider the fund’s structure. As ETF.com explains, “QQQ delivers a quirky but wildly popular mash-up of tech, growth and large-cap exposure. The fund and index are rebalanced quarterly and reconstituted annually.” Given that the fund is rebalanced quarterly, there’s always room for adjustment based on whatever conflicts the world may be enduring at the time.
All of this together ultimately makes it one of the best ETFs to bet on, especially in a world marred by coronavirus woes.
Robert Waldo has been a web editor for InvestorPlace.com since 2016. As of this writing, he did not hold a position in any of the aforementioned securities.