- 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
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 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 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.