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5 Stocks Powering Nasdaq ETF to Start 2023

Top 5 S&P 500 Stocks Poised to Beat on Q3 Earnings

Wall Street has been showing immense strength after the biggest annual loss since 2008 as easing inflation and hopes of the Fed’s slower rate hike path has rekindled risk-on trade. While the rally has been broad-based, the high beta and high growth sector took charge, with the tech-heavy Nasdaq Composite Index rising 5.1% in the initial two weeks of 2023. Invesco QQQ ( Free Report) , which serves as a proxy to the index, gained 4.2%.

This is in contrast to other most popular large-cap ETFs like SPDR S&P 500 ( Free Report) and SPDR Dow Jones Industrial Average ETF ( Free Report) , which gained 3.4% and 2.5%, respectively. As such, we have highlighted the five best-performing stocks of QQQ at the start of 2023. These include Warner Bros. Discovery ( Free Report) , MercadoLibre, Inc. ( Free Report) , ASML Holding ( Free Report) , Airbnb Inc. ( Free Report) , and IDEXX Laboratories Inc. ( Free Report) .

The tech sector, which was the biggest victim of surging yields last year, is the outperformer. This is especially true as inflation has been easing and consumer confidence is rising. The latest job data showed a deceleration in wage growth, which gave investors hope that the Fed could ease off on its interest-rate increases, resulting in a boost to tech shares (read: 3 Reasons Why Tech ETFs May Rebound in 2023).

Additionally, consumer prices unexpectedly fell for the first time in more than two-and-a half years in December. The consumer price index dipped 0.1% in December after gaining 0.1% in November. It rose 6.5% year over year in December, down from a 7.1% year-over-year increase in November and a recent peak of 9.1% in June.

The annual inflation growth was the smallest rise since October 2021. The data has put the Federal Reserve on track to again slow the pace of interest-rate hikes.

Given improving market sentiments, investors have jumped in to buy the most beaten-down stocks of 2022 and the Nasdaq was the underperformer last year. The Nasdaq is statistically highly oversold versus the S&P 500 right now, per various market participants.

Let’s take a closer look at the fundamentals of QQQ.

QQQ in Focus

Invesco QQQ provides exposure to the 101 largest domestic and international non-financial companies listed on the Nasdaq. Information technology accounts for 49.3% of the assets, while communication services and consumer discretionary make up for a 16.4% and 14.8% share, respectively.

Invesco QQQ is one of the largest and most-popular ETFs in the large-cap space, with AUM of $60.6 billion and an average daily volume of around 45.5 million shares. Invesco QQQ charges investors 20 bps in annual fees and has a Zacks ETF Rank #3 (Hold) with a Medium risk outlook.

Below, we have highlighted the above-mentioned five stocks in the ETF with their respective positions in the fund’s basket.

Top-Performing Stocks in QQQ

Warner Bros. Discovery is a media and entertainment company which creates and distributes portfolio of content and brands across television, film and streaming. The stock jumped 38.7% in the initial couple of weeks of 2023 and its earnings are expected to grow 71.7% this year.

Warner Bros. Discovery makes up for 0.3% of assets in QQQ and has a Zacks Rank #3 (Hold). It has a Value Score of A (read: A Spread of Top-Ranked Value ETFs to Bet in 2023).

MercadoLibre is one of the largest e-commerce platforms in Latin America. The company is a market leader in e-commerce in Brazil, Argentina, Colombia, Chile, Ecuador, Costa Rica, Peru, Mexico, and Uruguay based on unique visitors and page views. The stock climbed 21% and accounts for 0.4% in the fund’s basket.

MercadoLibre has an expected earnings growth rate of 12.5% for this year. It has a Zacks Rank #3 and Growth Score of A.

ASML Holding is a world leader in the manufacture of advanced technology systems for the semiconductor industry. The company offers an integrated portfolio for manufacturing complex integrated circuits. The stock makes up for 0.5% of assets in the QQQ portfolio.

ASML Holding gained 19.4% in the initial days of 2023 and has an expected earnings growth rate of 41.2% for this year. ASML has a Zacks Rank #2 (Buy).

Airbnb is a leading platform for unique stays and experiences. The company provides a marketplace for connecting hosts and guests online or through mobile devices to book spaces and experiences. Shares of ABNB are up 15.2% so far this year. Airbnb has an estimated earnings growth rate of 8.7% for this year (read: 5 Tech ETFs Riding High on Sectors’ Comeback to Start 2023).

Airbnb accounts for a 0.3% share in QQQ and has a Zacks ETF Rank #3. It has a Growth Score of A.

IDEXX Laboratories is a developer, manufacturer and distributor of products and services primarily for the companion animal veterinary, livestock and poultry, water testing and dairy markets. It gained 15.1% in the same timeframe and accounts for 0.3% in the fund’s basket.

IDEXX Laboratories is expected to see an earnings growth of 19.1% for this year and has a Zacks Rank #3.

Written by Susan Bellini