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More on my Latest Stockmarket Toy – QQQ5

June 13, 2024

This is a fabulous chart. If you are looking for an ETF, this is an excellent choice. There is a leveraged version, SOXL, which thanks to the nanny state will be even more problematic to buy for the innocent juveniles who occupy this ‘sceptred isle’.

The US semiconductor business has become the world’s third-largest economy ahead of Japan and only behind the USA and China. Semiconductors are the beating heart of the technology revolution and should be the beating heart of modern share portfolios.

QQQ5 shares will be heavily influenced by what is happening with the semiconductor business and the Gen AI revolution. In a recent alert, I suggested investing a regular sum monthly in QQQ5. Looking at the chart I have had another idea.

Above is a chart of QQQ3 with each candle representing 3M. Some 12 years ago QQQ3 had a low price of $3, not a million miles from where QQQ5 is now. Fast forward 12 years and QQQ3 is around $210 and has been higher.

Could Buying QQQ5 be Like Buying QQQ3 12 Years Ago

This begs a question. If QQQ3 can make it from $3 to $210 could QQQ5, which is even lower priced, do something similar? Is buying QQQ5 now like buying QQQ3 12 years ago? Who knows? But it does suggest an exciting strategy.

How about buying a tranche of QQQ5 every time the main digit changes? Buy some now at $1 plus; buy some more at $2 plus and so on. If the numbers do become much larger, whoopee, then no need to buy on $1 increments but just whenever the big number changes significantly.

Like any strategy, it will work well if the shares are in a secular uptrend and be less effective if they trade in a range. I think the odds are good that they are in a secular uptrend with such excitement in the world of technology and shares like Apple, Microsoft and Alphabet breaking higher and looking attractive on the fundamentals.

As always, whatever the strategy there is a case for doubling up on important buy signals. You could even chase the shares higher on digit changes and pile into declines on buy signals. Your risk is a terrifying falling-off-a-cliff decline. This will most likely happen somewhere down the road but if you tough it out it will all work out in the end.

Big Declines in US Shares Are Always Buying Opportunities

As Warren Buffett says of every US bear market. Keep faith in the resilience and ingenuity of the American people and big declines are ALWAYS buying opportunities. When investing in individual stocks you need to choose wisely and the stocks that did well in one bull market may not do so well in the next. But that is not a problem with QQQ5 because, like QQQ3, and ultimately QQQ and the Nasdaq 100 itself it is regularly rebalanced.

Below is what Leverage Shares says about QQQ5.

Opportunity to magnify returns in one simple trade. Trades like equity on an exchange, with multiple market makers (MMs). You cannot lose more than the amount invested, and an intraday rebalance mechanism is designed to cushion the largest intra-day falls. Simple to trade, no need for futures, no need to use margin accounts. Transparent structure with full ownership of the underlying assets, so credit risk effectively negated. Is independent and managed by industry experts.
Key Risks

Investing in Short and Leveraged ETPs is only suitable for sophisticated traders who understand leverage, daily rebalancing and compounded daily returns. Investors can lose the full value of their initial investment (but not more). Losses are magnified due to the nature of leveraged returns. Therefore, Short and Leveraged ETPs are only suitable for investors willing to take a high level of risk. Daily compounding may result in returns which an investor may not expect if the investor has not fully understood how a Leverage Shares ETP works. Due to daily rebalancing and compounding, ETP returns measured over periods longer than one day may differ from the returns of the underlying stock multiplied by the leverage factor. Only use these ETPs if you can monitor your positions daily or during the day.

Leverage Shares website

I expect there is a difference between an ETP like QQQ5 and an ETF but I could not discover what it was.

Bear in mind that the lawyers have had a look at these risk factors. They always say that these leveraged shares have to be monitored daily and are unsuitable for long-term investors. This is simply not true as can instantly be confirmed by looking at the charts. QQQ3 has quadrupled since January 2023 and its performance is closely linked to the performance of the Nasdaq 100 and through that to the US economy.

One of the key things about any kind of $-cost-averaging programme, which may take the form of buying on digit changes and post-decline buy signals, is that it makes you buy the shares when you don’t feel like buying. When the media is full of doom and gloom you will be buying.

Strategy – Keep Taking the Pills, Buy More QQQ5

Is there such a thing as a sure-fire big winner in the stock market? There shouldn’t be but regular investing in QQQ5 looks like a candidate. As long as you keep buying and US shares ALWAYS recover from declines you should win and win big, very big if a bull market on the scale I anticipate is still in its infancy.

Share Recommendations

SOXX. Buy @ $253

SOXL. Buy @ $61

QQQ3. Buy @ $222

QQQ5. Buy @ $1.75

US prices based on pre-market indications

Further reading

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