Talk Your Book: Investing in Next Gen Tech Stocks

That's the tech juniors, is that right Michael?

That's right, Ben. All right, Invesco.com to learn more.

“Welcome to Animal Spears, a show about markets, life, and investing.”

Join Michael Badnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion, and do not reflect the opinion of Redhall's wealth management. This podcast is for informational purposes only, and should not be relied upon for any investment decisions. Clients of Redhall's wealth management may maintain positions in the security discussed in this podcast.

Welcome to Animal Spears with Michael and Ben. There's a time there, Ben. When was it? It was a 23 when I was like apologizing to the audience and sent to you, I guess. For, sorry, we're doing this talking again, we're doing it. We're talking about the Mac 7.

Because that's all there was to talk about. There was one year in particular, I do think it was 23, where the S&P was up, whatever it was, and X, the Mac, was basically flat, or said differently. The Mac 7 was up 20% of the 493 were flat, like it was that stark. And this year, we're recording this intro on February 9th.

They're spread between the equal weight and the cap weighted S&P has never been this large.

And I would imagine, like I can't prove it, with the cursory glance, maybe I could, that if you were to equal weight the tech stocks versus tech, it would look similar, said differently. What about the juniors? Today we're talking to in Vesco about the junior cues, the triple QJ. Yes, as of today, year to day basis, this is just price only the next gen, which is the triple Q with a J on the end.

It's up almost 6% and the cues themselves are just about flat on the year. So, you're seeing this not only S&P and the Nasdaq, you're right, it was all like the biggest stocks are carrying all the weight. When is this other stuff going to play catch up? And now we're seeing that happen.

And so we on today's show, we talked to Paul Schroeder. Paul is the equity product strategist at Invesco, the QQQ equity product strategist. And they have all these different cues, strategies that they talk about, so we talked about some of them today, but we really highlighted these juniors and so it's the other Nasdaq 100, which is the 100 biggest, and then this is the next 100, right?

So, call it midcap, kind of growth space. And yeah, it's up for me this year, so here's our talk with Paul. Paul, welcome back, good to see you again. Great to see you too, thanks for having me on Michael and Ben. If I'm a betting man, and I think our listeners know I am,

I would bet that everybody who's listening to this knows of the Nasdaq 100, but I don't know that they are familiar with the juniors, the QQQJ, which is what we're going to be spending most of the show talking about today. Paul, who are the Nasdaq juniors? Yeah, is that really what did you make that up Michael?

“I just thought about radio voice, no, that's what they're called, no?”

Well, it's the Nasdaq next year, but a lot of people within the firm, you know, the J, obviously junior, so I think you have the nail on the head, Michael. Oh, and I call them juniors. All right, all right.

I've always said there need to be more juniors.

Like why do we reserve that just for precious metals? Junior gold miners and silver miners, there should be further stocks. Yeah, I couldn't agree with you anymore. I mean, QQQJ was launched in 2020 as part of our broader innovation. So, and to the point that you just made Ben, I'm surprised that we didn't launch this sooner.

You know, to really capture the halo effect from the cues, Michael, you're 100% correct. You know, I talked to people from my local community, whether it's church, kids basketball team, my family, and they're like, "Oh, hey, I saw your QQQQ commercial. Very familiar with it."

“You know, in, you know, very frequently, in nice cases, you know, like it's made me a lot of money through the years, right?”

But your point, not that many people have heard of QQQJ, right? So, really, we launched it back in 2020 to really extend out what QQQQ really provides exposure to. So, you're looking at stocks 100 and 1 through 200. Non-financial companies listed on the NASDAQ stock exchange that are in QQQJ.

It tracks the NASDAQ next year, 100 index. You know, we've been a big partner with NASDAQ through the years over 26 years through QQQ. And I think it just makes sense to extend that out with all the success we've seen from the QQs for the years. Does that end up being more of like a midcap index, or is it still technically large cap? So, it falls somewhere in the middle. I mean, we define it as a midcap growth strategy,

morning start defines it as a midcap growth strategy, so definitely it is.

where we are in the market, is that it does generally tend to skew bigger than your average midcap

“growth strategy. I think when you look at something like the S&P 400, that could even be argued”

that it's borderline small cap. We're a little bit bigger in size from a market cap perspective within J. And the way that I like to think about it is it could be its own standalone within the midcap bucket, not that many people invest in midcap right directly, but it's a good way to diversify against your large cap exposure. I'm looking at the holdings, and the largest one is Sandisk at DeBenz

question. This is like a large company. It's $8 million. I'm guessing that when we constitute,

this will graduate out of the juniors. They're definitely as possibility for it. I mean, we reconstitute it on the same schedule as the Qs. And the companies in the Qs are strictly disqualified from being included, right? So you have zero overlap. And when they both change holdings, you generally tend to see about five to seven holdings move up from QQQJ and go into the Qs, right? Every year you have things that pop up, right? What's going to be the graduate

set move from J into the Qs? We see about four to seven, as I mentioned, and that's definitely

“at the top of the list of being potentials to move in. You know, I think as we saw earlier this year”

with the Qs, just last month's Walmart moved in because it changes where listed over to NASDAQ and AstraZeneca dropped out. So you get some of these off-cycle additions. And if you have

something like that, where Walmart obviously was never in J, you might have a company like Sandisk

at Leapfrogd over, right by a company like Walmart, right? But I think looking at those top holdings by market cap kind of give you an idea, assuming between now and next December, how performance is of potential additions into the Qs? There's this idea that the NASDAQ is just all technology stocks. I guess from people who aren't aware, but this is actually a pretty diversified portfolio. Like, even the top ten holdings that only you have Sandisk and eBay and some of the coreweaves

and most stocks that people know, but there's United Airlines. Altabudies when it sticks out to me because I have daughters where really interested in the skin care these days. Same. So I have to see

all the altabudies supplies around. But even just looking at the sector weightings, tech is obviously

the biggest sector, but there's a healthcare component here and there's consumer to component. And so this is, I guess this is probably more diversified than most people would assume. You're 100% right. So people just assume because the Qs is about 60% tech that QQJ is about same as you alluded to. The tech exposures half of that of the Qs around 30, 32%. Similar though, the top four are the same. Tech consumer discretionary healthcare industrials.

Right, but I think with the type of exposures that that you do see within health care and how fastly it has been growing within J. I think you do get a different sort of exposure within that even within tech, you know, you get a different exposure within semis within software, software maybe a dirty word over the last week, right? But within software along with other components within the tech sector. This is a really interesting time in the market. Listen,

let's be honest, the past couple of years where I was going to say relatively boring, that's not exactly true. I mean, it's not, in fact, it's not true at all. But like the conversations that we were having, Ben, remember when it was like every week, I was saying to the audience, I promise we're not going to do the max seven this week. But in 2023, they were the only thing going up and the four and three were going sideways and it was just getting redundant.

Now, it was nice, right? If you're like a broad, broadly diversified investor, like you were doing very well. Obviously, the stock market had had had had a great couple of years, but it was getting boring. And it was repetitive and now the story is a lot different. So you see small cap stocks doing well all over the place, renewed interest in them. And you're seeing that in the, in the juniors as well, I was surprised to see that the juniors have performed the majors is what I'll

call the triple cues in this context over the last year. I'm curious if the type of conversations that you all, I'd invest or having with their clients are reflecting the renewed interest.

“It definitely is. I mean, you have to think about our ETF lineup as well. Michael, you know, we have”

over 230 different tickers here in the US alone, right? And it's used obviously as a major part of that story, but you know, we're trying to make sure that our clients portfolio is our diversified. So we've been having that conversation around diversification, concentration risks, that's in the broader market. You know, within the S&P 500, you know, for the past three past two years, really,

So it's a conversation that that we have in having. And in some situations like back in 2023,

it almost felt forced, right? Because everyone was so focused on mags seven. Everyone excited about the AI revolution that was upon us. And obviously the returns was driving a lot of that conversation. You know, what we've seen over the past 12 months is a broadening out that I think is very welcomed, at least within in Vesco. And I think probably other asset managers as well, but also clients, right? You know, they're speaking to the end investor on a daily basis saying,

hey, you need this diversified portfolio. And a lot of the conversations are why isn't there more pale interior in my portfolio? Why? Yeah. Why? Why don't you own pale interior? Why do you own these boring ETFs? Why you own this value ETF value investing is dead, right? When secretly, you know, over the past week or so, value has been up. It has positive performance, right? So there's

these rotations that happen in the market. We're always doing our best to make sure our clients know

“that everything is cyclical and you need to make sure you are positioned for what might happen”

the next day next week. And it's made the conversations a lot easier. And has opened up the conversations to something outside of a top ten holding within QQQ? Well, set the stage here. This is the first week of February that we're recording this. And earlier this week, the big stocks were all rolling over. And RSP, the equal weight that you mentioned, was hitting, making new all-time highs. And so you're starting to see this. And I think it's really the last, I don't know,

12 to 15 months, international stocks have done better and small cap stocks have done better. And value stocks have done better in quality stocks. And all these other places that you mentioned, these diversification pieces. So people who have been worried about the concentration in the market cap weighted indexes, there's plenty of easy ways to diversify now. It was just you had to force yourself to do it when it didn't feel very comfortable. Are you also seeing that in the

flows these days? Are all these other funds starting to get more money because people are seeing the performance per couple a little bit? We definitely are. I mean, to give you an idea of where we were midway through 2025, we have a momentum fund SPMO, which is a top quartile of momentum ETFs

over the past 12 months. And it went from being about a billion dollar fund, about a nine billion

dollar fund, right? Just like that, because I was the exposure that it had. You know, towards the tail end, though, right? We started to see more flow come back into equal weight. We started to see more flow come back into quality, et cetera, right? So we definitely have seen it in the flow. And fast forward to 2026, you know, RSP has brought in several billions of dollars so far in net

“new flow off of, I think this renewed skepticism around the hyperscaler is how much you're spending”

and whether those revenues can be able to keep up with the spend that they have. One of the charts that I use all the time on our shows is RSPS or actually RSPD divided by RSPS. And that is a ratio chart of the equal weight discretionary ETF at Invesco divided by the equal weight staples ETF. And I do that because the GIC sector, and correct me if I'm like mischaracterizing it, they have 40, 40 odd percent of this, the last I checked in Tesla and Amazon. So that, like,

really skews it. I mean, directionally it's the same, but when I look at the equal weight basket, that gives me a really good indication of where the market is in terms of like a risk on risk off type of environment. You have the equal weight for every sector. And I'm curious, like, our people are people allocating there because for the last couple of years, it was just, it was S&P 100, right? It was mega cap or get out of here. Nothing else was working.

Are we seeing, like, more conversations? Is that, like, two granular, like, our people, do people care about the equal weight sector ETFs? They do and they don't. I mean, it's obviously very large sweet that that we have here and we're the only shop in town that equal weights, those sectors, right? So we do have a decent amount of AUM and them. But I think to really

“accurately answer that question, Michael, you have to think about the way our clients,”

these FAs, the way that they run their business, right? We're running into fewer and fewer FAs that run and take specific sector exposures like that and using more of cowards, using more models from the home office or, you know, taking more of a diversified higher level, like almost morning star or style bucket approach, with that being said, though,

you need to get your sector right, but you also have to assume that there's going to be broad

participation within that sector, right? So when you do have some of the smaller companies really rip in within discretionary, right, outside of Tesla, right? Then evil weight is definitely the way to go. And I think in general discretionary is a great example of it when you have such a high concentration, very few names. It really does make sense to equate perhaps all the time if you are taking that sort of sector exposure. One of the areas that we've talked that is really

seems to be on a investor's radar as the less two to three years is anything with options. And I know you guys have in your suite some NASDAQ products that use options as well. Are you still seeing a lot of fanfare there from investors who really love to see that high income? Oh, we definitely are. I mean, you just think about where demographics are right now. And the way people look at retirement, right? I mean, gone are the days of defined benefit

“plans and here are the days of design contribution plans where you have to generate your own income,”

let alone people are a right who may not be able to rely on social security. When we do retire, income products are here to stay and they're going to continue to be relevant. One thing I do find interesting is that, you know, 15 years ago, you'd talk to someone who is just entering retirement. And they're like, if the 10 year was just at 5% if it was at 4.5%, I'd throw my whole portfolio in that. All right. And we've had that for the past two years. And what did we get from that?

We didn't get portfolios that were 100% treasuries. We got portfolios that augmented it with dividend income strategies, with structured node strategies. And obviously, as you live to options strategies, right? You know, it has been one of the fastest growing areas within the ETF business, not only within active ETFs in general, but option income, right? And in Vesco definitely needed and wanted to be part of that conversation. You know, we have a few

“different flavors of it. They are actively managed ETFs. But I think the one that's gained the most”

success has been QQA, which uses the NASDAQ 100 portfolio as the base, the primary portion of it,

and it has an option overlay of it where it's basically selling covered calls, selling cash

secured puts to generate around 10% above the indexes dividend, right? We pay that dividend out on a monthly basis. And we've been able to do that pretty successfully through the past year and half two years. So a whole idea of boomer candy. That's a real thing that people really love these things because they'd like to see the regular income come in. It totally is, I mean, Eric Bell Tunis, I think maybe as coined that or I've heard him use that term quite a bit, you know, income is

such a large concern of people who are retired, right? And I think with just where interest rates have been, if you think about someone who is 60 to 70 years old, they've only basically seen

the tenure treasury continue to fall interest rates fall after they got spacked with their first

mortgage at 8 to 12%. Right? They're looking for something that might not only provide a steady stream of income, but also have a component to it that has some capital appreciation. And I really appreciate the advisors that are able to shift that conversation from not only the income or yield that a portfolio is bringing in. Also think about it from a capital appreciation standpoint, especially if it's in a qualified account. It's being taxed the same when you pull that money out

regardless, right? It's income. So why not look at it from two different angles, along with the appreciation that that equities have given over the past three to five years? Paul, getting back to the J's, how different is the exposure? Obviously Mark Kemp is massive, but in terms of the sector exposure, is it too dissimilar or does it look, does it look a lot like the majors? No, it definitely

“is a little bit different. And I think the part that sticks out to me the most is the health care”

exposure, right? We like to look at the exposures with the QQQJ and the Q's, not only through your typical gicks or ICB lens, right? But we also dive a little bit deeper with the help of Beth's deck by looking at the different patents that these companies are filing as well. If you think about it, patents are really a roadmap for you to see what these underlying companies are really focusing on and where they feel their business is going to be not just texture, but three,

five multiple years down the line, right? And where we see the most patent activity within QQJ over the past 12 months has been bioinformatics, right? Which definitely falls within pharmaceuticals that biotech sub industry, right? So you do get differentiated exposures within QQQJ, yet less tech exposure, obviously with the great job that Nasdaq has done with pulling companies

that pool of companies does generally tend to skew that way. But overall, it is a great diversifier,

if you're looking at QQQ or just pairing it with the SPY or VLO, you know, it has about 4% overlap with S&P 500, 0% overlap with the Q's, so definitely a great diversifier. Okay, I'm curious about your low-volved strategy. So you have a QQLV, which is 25 names of the lowest

“volatility for the last 12 months, because I think a lot of people would think that the Q's have”

more volatility. What does this tend to own? Like what kind of stocks is that kind of fun to owning? Yeah, so what you're generally tending to see is it's interesting the exposures that that you do see come up. I mean, I don't think very dissimilar from other low-volved strategies. You do tend to see

some staples pop in there along with some industrials as well. It's a strategy that I think

can definitely hold a place within a portfolio, especially if you're owning the broader market. If you think the way the S&P 500 has changed through the years to how growthy it has skewed to the point where morning star has to redefine the definition of growth, you know, a few years back, being able to tag on and complement your core exposure with something like a low-volve, if you are a little bit more risk adverse, or like a QQA if you are more income-focused,

or even a QBIG, QBIG, which owns the top 40% of the NASDAQ 100. If you have a longer-term time horizon and are really leaning into the current themes of those larger companies, it makes a lot of sense. Paul, how long did it take you to boom, boom, boom, all these tickers? That's impressive. You know, it's something that takes years of practice. I started with in Vesco on the back in the PowerShare's days as an internal wholesaler, right? About 10 years ago,

back in the week, we still had that name before we dropped it and just went with in Vesco ETFs. And I felt like a fish out of water I was in F-A before, moved to this side of the business, and back then it was maybe 150 different tickers, right? And everyone on the desk knows these tickers, they're rattling them off, you know, it's like muscle memory, you know, similar with even individual vests, individual investors are F-A's with stock, you know, AAPL, AVGO, NVDA, you know, it's just something

that sticks, it takes time though, it takes practice. So a consultant said to you guys, drop the PowerShare's, it's cleaner. I mean, that's above my pay grade. I wasn't in those conversations. I really enjoyed the PowerShare's orange. If you guys recall that back in the day, we had these orange was our primary color. Now, that being said, the in Vesco blue that we have now is pretty sharp, blues my favorite color. But yeah, it was, it was a sad day to see that name go.

“So we've seen a ton of innovation in the ETF space. And I think that's great for advisors and”

retail clients alike. Like, where were we headed next? Like, what else can investors expect? Because

at first it was just the index funds and you get this stuff at a really cheap cost, right?

Get your beta exposure for super cheap pennies on the dollar, and then it got, you know, like I said, more, there's buffered stuff now and there's active ETFs and there's the options. Like, where are we going next? Yeah. So I still think the active ETF phase is at the very beginning, even though we saw the most launches last year within active ETFs, really dominate the launch space. I still think that's where we're going. I mean, if you take a look at what we've done at in Vesco through the years,

you know, a lot of these larger companies similar to us are launching the active strategies that they've typically housed in either an SMA or mutual fund and launched that in an ETF, right? We're very active within that space. I would imagine we're going to continue to be active with that as we have a lot of really good active strategies within fundamental equity within the U.S.

“along with fixed income. So I think we're still going to see a lot of growth within that. Now being”

kind of an ETF passive index-based purest, right? I generally try to stick with what falls in my wheelhouse like EQs and individual factor-based investing and sometimes multi-factor, but I have become a nerd a little bit on options through the years. So all the launches we've seen over the past 12, 18 months, you know, with this option-based income is really intrigued me. All right, Paul, where do we send people want to learn more? So if you'd like to learn more about

QQQJ, the Invesco NASDAQ, next gen ETF, the vinvestco.com/QQJ, just learning more about Invesco in general and vestco.com. All right, appreciate it, Paul. Thanks for coming on. Yeah, thanks for having me. Great conversation, good questions. Okay, thank you to Paul and I were to check out in vestco.com to learn more email us,