With the stock market having increased volatility in March and April, we have seen some wild swings in valuations of tech companies and ETFs. The issue is that companies considered tech have most of their earnings in the future; some of the companies might have even be losing money hand over fist before the pandemic hit. Think of those tech unicorns that are famous for it. In the last month, though, with markets surging off their recent lows, tech is back in vogue.
The most impressive inflows belong to the Invesco QQQ Trust (QQQ). In the last 30 days, it has brought in an impressive $1.66 billion, but the last 90 days are far more impressive with an inflow of $9.03 billion. Investors are frothing over the fact the ETF is positive on the year now, despite what some consider a higher risk rating. Over 30% of the ETF is in Microsoft, Apple, and Amazon.
One ETF that caught attention this week was the ProShares UltraPro QQQ (TQQQ). This is one of those 3x levered ETFs, but the flows are interesting. In the last 30 days, the fund was sold hard, losing almost $497 million. But in the last 90-days, the fund had huge inflows of $1.78 billion. Some investors likely timed this levered play well and are taking some profits off the table.
The Direxion Daily Semiconductors Bull 3x Shares (SOXL) is another 3x levered play on the semiconductor space, but in this case, investors seem to think there is more room to run. SOXL had a 30-day inflow of about $76.5 million, but a massive $838 million inflow in the last 90 days. There could be more momentum in semis going forward.
A couple more notable inflows in the last 30- and 90-day period were the Technology Select Sector SPDR Fund (XLK) and the Fidelity MSCI Information Technology Index ETF (FTEC). In the last 30 days, they had inflows of $184 million and $161 million, respectively, and in the last 90 days $208 million and $176 million. The low net expense ratios of 0.13% and 0.084% are a likely attractor to the holdings.
In terms of ETFs that saw major outflows in the last while, the ETFMG Prime Cyber Security ETF (HACK) and the Invesco S&P 500 Equal Weight Technology ETF (RYT) were the main ones. They lost $130 million and $153 million in the last 90 days. While that only represents about 10% of their total AUM each, it is a telling sign for ETFs that have much higher net expense ratios than their competitors, currently sitting at 0.64% and 0.4%.
There is likely a shift in the ETF industry to lower cost holdings happening right now, and as investors are forced to make changes in times of volatility, they can take advantage of tax plays to realize losses on one holding to buy essentially the same thing for another. If they are stuck in the higher fee holding, volatility will allow them to make the switch in a more tax-efficient manner.
The technology space gets more interesting every day and seems to be able to take advantage of its strengths during the global pandemic we are experiencing. High margins and growing user bases, as well