In terms of CAPE ratio (see the second chart below), the Nasdaq 100 index (and hence the QQQ fund too) traded at 44.7x as of June 30, 2023, according to Siblis Research. In other words, its current P/E is only 5% below its 10-year peak and its current P/B is about 17% lower. As seen, its P/E ratio was in a range of 19.7x to 36.2x and P/B in a range of 3.03x to 8.93x. The right panel of the chart provides its historical range in the past 10 years. So, the above chart will also serve as a context for me to estimate QQQ’s valuation premium.Īs seen in the left panel of the first chart below, QQQ is now trading at a P/E of 34.5x and P/B of 7.38x. I could not find long-term historical P/E or CAPE data for the Nasdaq 100 index or the QQQ fund. As seen, the CAPE currently sits at 30.64x, among the highest levels in its entire history. To set the stage, the next chart shows the Shiller CAPE ratio for the S&P 500. Source: MorningStar data Valuations are extremely high relative to traditional measures However, a small drawback is that QQQ charges an expense ratio of 0.2%, significantly higher than most large passively index funds (typically below 0.05%). It boasts an AMU of more than $202B and features a tight trading spread usually within 0.01%. Therefore, QQQ is considered a large-growth fund (e.g., by Morningstar as seen in the chart below). Launched in 1999, the fund tracks the largest 100 companies in the tech-oriented Nasdaq exchange. It’s the oldest and also the largest ETF fund based on the Nasdaq 100 index. ![]() Other signs such as tightening risks and leverage are kind of obvious in my view and have been frequent topics on the SA platform. The second reason is a bit more fundamental. The first consideration is purely pragmatic and obvious: I wanted an article of reasonable length. I want to limit the scope to only three of these signs. There's broad bullish sentiment overall and also specific to the fund itself. ![]()
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