Apple (AAPL), Microsoft (MSFT), Tesla (TSLA) and the FANG stocks may soon become some of the best stocks to buy as they build new bases. But which should you buy?
That's a tough choice, for sure. Here's another idea: Buy an exchange traded fund like Invesco QQQ Trust (QQQ), and you'll gain access to all of these stocks, and much more.
The $145.2 billion ETF, launched in March 1999, is trouncing the broader market with a 37% year-to-date gain through Wednesday's close. SPDR S&P 500 ETF Trust (SPY) is up 8%. And QQQ has steadily outpaced SPY over the past three, five and 10 years as well.
QQQ hasn't offered a good chance to buy since an early-May breakout. It rallied 40% to its Sept. 2 high, before pulling back with the broader market. A test of the 10-week moving average last month set up a chance to add a small number of shares.
But the ETF — which tracks the Nasdaq 100 — has now formed a flat base with a 303.60 buy point, according to MarketSmith chart analysis.
Information technology accounted for the biggest sector weighting as of Tuesday's close, at about 48% of assets. Consumer discretionary and communication services made up roughly 19% each, health care came in at 6.5%, consumer staples 5%, and industrials and utilities rounded out the rest.
Best Stocks To Buy?
As one would expect, the top five holdings read like a who's who of big-cap tech stocks: Apple, Amazon (AMZN), Microsoft, Facebook (FB) and Alphabet (GOOGL). Together, they totaled nearly 43% of the portfolio.
The next five stocks, which make up almost 14%, include Tesla, Nvidia (NVDA), Adobe (ADBE) and Netflix (NFLX).
Four of the top 10 holdings — Adobe, Microsoft, Nvidia and Tesla — also make IBD's Leaderboard list of top stocks. Tesla leads the quartet with a more than 450% gain this year through Wednesday's close. Graphics-chip designer Nvidia rallied 140%, Adobe gained 54% and Microsoft advanced 40%.
QQQ's top holding, Apple, is up 65% this year. Though the Tuesday launch of its widely anticipated iPhone 12 series fell flat for investors, Apple stock is shaping the right side of a new cup base. The potential buy point for now is 138.08, or a dime above the left-side high.
Adobe, Microsoft, Nvidia and Tesla are also working on new bases. Adobe, Microsoft and Nvidia's bases are second stage, which means they are still in the early phases of potential long-term advances. Apple's and Tesla's bases are a respective third and fourth stage. Such later-stage patterns can be more prone to failure.
But here's the beauty of investing in an ETF like QQQ. Buying a basket of stocks as opposed to several individual names greatly reduces risk. Even if a late-stage breakout doesn't pan out and a stock falls, that's only one of 100 stocks, in QQQ's case.
But if the stock breaks out and goes on a tear, it boosts the ETF's performance. QQQ charges a 0.20% expense ratio.