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Invesco | January 27, 2021

Accessing innovative companies on the rise with Invesco NASDAQ Next Gen 100 Index ETF Fund

Key takeaways

  • R&D-powered growth: Considerable research and development spending may prime companies included in the NASDAQ Next Gen 100 Index  (Nasdaq:NGX)* for high growth.
  • Innovation across sectors: NGX constituents operate in diverse areas of the economy, including health care, transportation, and technology.
  • Graduation on the horizon: NGX’s high-growth, mid-cap companies can and do grow large enough to “graduate” to be included in the Nasdaq-100 Index.

It’s understandable for investors to focus on the biggest, most successful companies, but what about the mid-cap companies whose biggest growth spurts may be ahead of them?

One of our new offerings, Invesco NASDAQ 100 Index ETF Fund, provide access to the 100 largest non-financial companies listed on the NASDAQ (NASDAQ-100 Index*), Invesco NASDAQ Next Gen 100 Index ETF Fund offers that approach with a twist: exposure to the next 100 largest companies listed on the NASDAQ (ex-financials).

With a mid-cap focus, the companies in NGX are defined by their high expenditures on research and development as a proportion of revenue, which could prime them for high future growth.

Research and development spending is a key measure of a company’s commitment to innovation. Research and development can lead to new discoveries, competitive advantages, and cost-saving measures.

NGX constituents in focus

Roku, Inc.

A great example of the innovative technology companies you’ll find is, Roku, which has become seemingly indispensable during the COVID-19 pandemic, with recent service upgrades propelling the stock higher in 20201. A deal between Roku and Comcast’s NBCUniversal was also recently announced, bringing NBCUniversal’s Peacock streaming service to the platform.

JB Hunt Transport

NGX’s holdings aren’t just limited to technology — investors need look no further than JB Hunt Transport for an example of the diverse sectors represented. One of the largest transportation logistics companies in North America2, JB Hunt Transport provides multimodal, capacity-oriented solutions to a diverse group of customers throughout the United States, Canada, and Mexico, and with more people staying home, freight transport is more important than ever.

NGX graduates in focus

Thanks to their high growth profiles and innovative business models, some companies may eventually “graduate” from NGX’s holdings, into the NASDAQ-100 Index which provides access to the 100 largest non-financial companies listed on the NASDAQ.

DocuSign

DocuSign graduated in June 2020, and it’s easy to see why: the digital transaction and e-signature firm’s services have proven especially important during the ongoing pandemic. DocuSign’s total first quarter earnings totaled $297 million, for a 39% year-over-year increase3, and the strong earnings continued into the second quarter of 2020, growing 45% year-over-year.4

Tesla

Tesla is another innovative company that has moved on to bigger and better things. The electric vehicle manufacturer was added to QQQ on July 15, 2013 and hasn’t looked back.5 Tesla has since gone on to become the most valuable automobile manufacturer in the world6, with a market capitalization hovering around $608 billion (USD) as of December 8, 20207.

The bottom line

The companies held in offer a mid-cap focus across sectors and high growth potential, thanks in part to heavy investment in research and development. Over time, NGX’s constituents may graduate into NASDAQ-100 Index, featuring the 100 largest non-financial companies listed on the NASDAQ Exchange.

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1 Source: MarketWatch, Dow Jones, “Roku stock surges after company adds NBC's Peacock service to streaming platform,” Emily Barry, Sep. 21, 2020

2 Source: Transport Topics, “2020 Essential Financial and Operating Information for the 50 Largest Logistics Companies in North America,” Nov. 16, 2020

3 Source: DocuSign, “DocuSign Announces First Quarter Fiscal 2021 Financial Results,” June 4, 2020

4 Source: ZDNet, “DocuSign reports strong Q2 as revenue climbs 45%,” Natalie Gagliordi, Sep. 3, 2020

5 Source: Benzinga, “What to Expect From Tesla Shares After Joining QQQ (TSLA),” July 10 2013

6 Source: Forbes, “Tesla Is Now the World’s Most Valuable Car Company With a $208 Billion Valuation,” Sergei Klebnikov, July 1, 2020

7 Source: Nasdaq.com, December 8, 2020

*The NASDAQ-100 Index includes 100 of the largest domestic and international non-financial companies listed on the Nasdaq. The NASDAQ Next Generation 100 Index includes securities of the next generation of NASDAQ listed non-financial companies; that is, the largest 100 NASDAQ listed companies outside of the NASDAQ-100 Index®.

The S&P 400 Index is comprised of 400 companies selected as broadly representative of companies with midrange market capitalization (market valuation of between $200 million and $5 billion).

The Russell Midcap Growth Index is a market capitalization-weighted index comprised of 800 publicly traded US companies with market caps of between $2 billion and $10 billion.

An investment cannot be made into an index.

The Invesco NASDAQ 100 Index ETF Fund and the Invesco NASDAQ Next Gen 100 ETF Fund are not sponsored, endorsed, sold or promoted by the NASDAQ OMX Group, Inc. or its affiliates (NASDAQ OMX, with its affiliates, are referred to as the “Corporations”). The Corporations have no liability in connection with the administration, marketing or trading of the Invesco NASDAQ 100 Index ETF Fund and the Invesco NASDAQ Next Gen 100 Index ETF Fund. “NASDAQ®” is a registered trademark and is used under license.

Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent simplified prospectus. The views and opinions expressed are those of the authors at the time of publication, are based on current market conditions and are subject to change without notice. These opinions may differ from those of other Invesco investment professionals. There is no guarantee that these views will come to pass.

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© Invesco Canada Ltd., 2021 Invesco Canada Ltd. Published; January 28, 2021 NA12241