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Why TQQQ?

Raincheck Fund focuses on TQQQ because during uptrends, TQQQ often outperforms most of the stocks in the NASDAQ-100 (including the Magnificent Seven).

It’s no secret that in years past, the returns of the NASDAQ-100 (QQQ) and the S&P 500 (SPY) have been driven mostly by the Magnificent Seven (GOOG/GOOGL, AMZN, AAPL, META, MSFT, NVDA, TSLA).

The 10 largest U.S. companies accounted for 14% of the S&P 500 stock index a decade ago, 27% of the index at the end of 2023, and 37% of the index as of June 24 2024 [1]

  • The "Magnificent 7" mega-stocks account for over a third of the total weighting in the S&P 500, but the comprising 8 tickers make up only 1.6% of the 500 stocks in the index. [2]
  • The issue is even more apparent in NASDAQ-100 (QQQ), where the Magnificent Seven make up nearly 50% of the total weighting.

To put the outperformance of the Magnificent 7 stocks in perspective, consider the following:

  • S&P 500 increased by 24.2% in 2023 [3]
  • NASDAQ 100 increased by 55.1% [5]
  • As a group, the Magnificent 7 generated a 75.7% return [3]

Consider the performance of TQQQ, QQQ, and it's holdings from the first day of an uptrend on Mon. May 6 2024, through Wed. July 10 2024, as shown below:

Left: TQQQ out performs 98% of QQQ stocks (all but ARM and NVDA) from 5/6/24 to 7/10/24 uptrend. Right: QQQ chart over same timeframe.

Notice that during this time TQQQ outperformed every stock in QQQ, except for ARM and NVDA. TQQQ outperformed 98 out of 100 (or 98%) of stocks in QQQ during this uptrend.

This pattern is seen time and again. Consider returns for TQQQ vs the 15 top performing holdings in QQQ during 2020, 2021, 2023, 2024, and the trailing past 5 years, shown below.

Note: 2022 is excluded from below table as the Market Signal was negative for a majority of the year (see above 'in cash during downtrends').

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Why pick individual stocks when holding TQQQ during uptrends beats a majority of stocks?

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