Powershares QQQ Trust series 1

Invesco PowerShares QQQ Trust series 1Powershares QQQ Trust Series 1 is an exchange-traded fund incorporated in the USA. The ETF

tracks the performance of the Nasdaq 100 Index. The ETF holds large cap U.S. stocks. Its investments exclude the financial sector and therefore, tend to be focused on the technology and

consumer sector. The ETF weights the holdings using a market capitalization methodology.

NOVEMBER 12, 2015

ISIN: US73935A1043SEDOL: 2402433CUSIP: 73935A104

USChina

UKSingapore

NetherlandsIsrael

Switzerland

0 10 20 30 40 50 60 70 80 90 100

G e o g r a p h i c a l B r e a k d o w n

Communications

Consumer, Cyclical

Consumer, Non-cyclical

Industrial

Technology

0 5 10 15 20 25 30 35 40

Ma r k e t B r e a k d o wn

Dec

200

5

Dec

200

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Dec

200

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Dec

200

8

Dec

200

9

Dec

201

0

Dec

201

1

Dec

201

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Dec

201

3

Dec

201

4

50

100

150

200

250

10,000

20,000

30,000

40,000

50,000 EfficiencyAUM

QQQ US equity

NDX Index AU

M ($m

ln)

POWERSHARES QQQ TRUST SERIES

Group 18: Andy Voong, Mengyuan Tang and Hossein Goudarzi

Queen Mary university of LondonMile End Road, London, E1 4NS

Net of Fees

Benchmark

Tracking Error

Correlation Beta R2

3 months 1.4% 1.1% 0.8% 1.00 - -1 year 13.0% 11.8% 0.7% 1.00 1.00 1.00

3 years 22.0% 20.6% 0.7% 1.00 0.99 1.005 years 18.1% 17.0% 0.7% 1.00 0.99 1.00

Inception 5.5% 5.1% 5.7% 0.97 0.96 0.95Volatility 360D 14.07 16.48 - - - -

Clear Investment Strategy

Actively Managed NReplication

Strategy FullLeverage N

Securities Lending NProven 3rd Party

Index used as Benchmark

NASDAQ 100 TOTAL RETURN

Benchmark Ticker: XNDX Index

The NASDAQ-100 Index is a modified capitalization-weighted index of the

100 largest and most active non-financial domestic and international

issues listed on the NASDAQ.Sub-Fund Facts

Market price ($) 110.05Sub-Fund AUM

($Billion) 42.35Inception Date: 10/03/1999

Min. Investment: 0Turnover: (%) 15

Average Bid Ask Spread (%) 0.01

Expenses (%) TER (%) 0.20

Investment Type Growth, Large-Cap

Fundamentals Dividend 12 month

Yield (%) 1.02Number of

Holdings 109Dividend Net 3yr

Growth Rate 23.05P/B ratio 4.89

Outstanding Shares (mln) 374.3

Sharpe ratio 1yr 0.76P/E ratio 20.95

Average Volume 30d (shares, mln) 31.9

Average Volume 3 Months (USD)

2,943,550,750.48

Implied Liquidity (mln) 13.412

Premium to NAV 0.03%

Exchange Domicile

NASDAQ GM USBloomberg Curren

cyQQQ US equity USD

Outstanding Shares (mln) 374.3

52 Week High 115.4752 Week Low 84.74

ContentsPOWERSHARES QQQ TRUST SERIES......................................................................................................1

Overview...............................................................................................................................................3

Industry Overview.............................................................................................................................3

Advantages of an ETF........................................................................................................................4

Powershares QQQ Trust Series 1...........................................................................................................4

Comparative Analysis........................................................................................................................5

Fundamental Analysis............................................................................................................................7

Business Cycle Analysis......................................................................................................................7

Market Breakdown............................................................................................................................8

Company breakdown.........................................................................................................................8

Geographical Breakdown..................................................................................................................9

Seasonality Comparison....................................................................................................................9

Risk Assessment..................................................................................................................................10

Volatility..........................................................................................................................................10

Sector and Company Concentration................................................................................................10

Market Risk......................................................................................................................................10

Macro Risk.......................................................................................................................................10

Currency Risk...................................................................................................................................11

Technical Analysis................................................................................................................................12

Moving Averages.............................................................................................................................12

Relative Strength Index....................................................................................................................12

MACD..............................................................................................................................................13

Bollinger Bands................................................................................................................................13

Monte Carlo Simulation...................................................................................................................14

Fibonacci Retracement....................................................................................................................14

Recommendations:..........................................................................................................................15

Conclusion...........................................................................................................................................15

Appendix.............................................................................................................................................16

Table 1.............................................................................................................................................16

Table 2.............................................................................................................................................16

Table 3.............................................................................................................................................17

Profitability of Top 10 Companies in Fund.......................................................................................17

Descriptions.....................................................................................................................................18

1QUMMIF Investment Club |2015-2014. All rights reserved www.qummif.org

References...........................................................................................................................................19

OverviewIndustry Overview


In comparison to Mutual funds, the ETF industry is still very young. The first ETF was introduced in 1993. The US ETF market leads the way with 1,411 different funds and nearly $2 trillion in assets under management at the end of 2014 and accounts for around 73% of the Global ETF assets.1

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 20140

500

1000

1500

2000

2500

US Net ETF Assets (USD, Trillions)

United States

Europe

Africa and Asia-Pacific

Other Americas

0 10 20 30 40 50 60 70 80

Global ETF Market Distribution (%)

Advantages of an ETF- Diversification- Relatively simple method to gain exposure to different markets3

- Cost effective for buy-and-hold strategies- Recommend buying and holding to avoid large commission fees from brokers

1 http://www.icifactbook.org/fb_ch3.html#what2 ETFs have become very popular over the past 10 years. This is due to the relative performance of equity, bond and commodity markets. Gains in major US stock indexes and declining long term interest rates have made it relatively attractive for investors to access these markets; which includes buying ETFs that primarily tracks with an index.


http://www.icifactbook.org/fb_ch3.html#what

- Usually have no minimum investment- Trade Flexibility which is ideal for non-institutional investors4

Powershares QQQ Trust Series 1

20002001

20022003

20042005

20062007

20082009

20102011

20122013

20142015

05

101520253035404550

QQQ US Equity Asset Under Management

Fund

Tot

al A

sset

s (U

SD, B

illion

s)

5

Jan 2010 Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 20150

50

100

150

200

250

300

40

50

60

70

80

90

100

110

120QQQ Equity Price and Volume

Volume (USD, millions)QQQ US Equity

Volu

me

(Mill

ions

, USD

)

QQ

Q U

S Eq

uity

Pric

e

3 i.e. Instead of having to invest in many individual stocks in a country, you can purchase a fund that tracks an underlying index to gain exposure to a foreign market. The Powershares QQQ Trust Series 1 ETF tracks closely with the NASDAQ 100 Stock Index in the US. In fact, the benchmark index is the NASDAQ 100 Total Returns Index.4 http://www.investopedia.com/articles/mutualfund/05/etfindexfund.asp5 Data acquired for the period 12/11/2000 to 12/11/2015.


http://www.investopedia.com/articles/mutualfund/05/etfindexfund.asp

Comparative Analysis6

Total Return (%)7 1m 3m YTD 1yr 3yr 5yr

Average 7.88 -0.33 8.2 10.98 23.15 18.49

XNDX 6.64 3.30 11.04 13.23 23.29 17.84

QQQ US 6.61 3.21 10.77 12.99 23.04 17.58

IBB US 7.14 -10.33 8.99 13.96 36.63 30.63

QQQE US 3.27 -1.03 2.63 6.23 21.88 -

QQXT US 2.01 -3.73 3.04 6.98 20.92 16.00

PNQI US 7.66 4.31 18.65 19.13 27.04 17.82

QQEW US 3.15 -1.16 2.24 5.79 21.54 14.57

SPY US 3.35 0.59 2.72 4.40 16.98 13.62

Ticker8 ETF Sharpe Ratio Benchmark Sharpe Ratio

1 Year NAV Tracking Error (%)

Average 0.75 0.77 0.12

QQQ 0.94 0.96 0.06

IBB 0.71 0.71 0.05

QQQE 0.58 0.62 0.26

QQXT 0.70 0.74 0.09

PNQI 1.27 1.28 0.10

QQEW 0.56 0.62 0.25

SPY 0.49 0.49 0.05

6 Tables in this section have been rounded to 2 decimal places. 7 Total Returns (%) figures are quoted as of 10/11/2015, 2:14pm.8 Comparable ticker Descriptions Table in the Appendix


Ticker Expense Ratio (%)Average Bid Ask

Spread (%) Premium (%)52 Week Average

Premium (%)

Average 0.42 0.08 -0.01 0.00

QQQ 0.20 0.01 -0.03 0.00

IBB 0.48 0.10 -0.08 0.01

QQQE 0.35 0.06 -0.08 0.00

QQXT 0.60 0.20 0.02 0.04

PNQI 0.60 0.16 0.05 -0.03

QQEW 0.60 0.06 0.07 0.01

SPY 0.09 0.00 0.01 0.00

Powershares QQQ Trust Series 1 has a low bid ask spread which giving the ETF adequate liquidity. This is important for us to be able to buy and sell at certain time periods. A Sharpe Ratio of 0.94 is above the other comparable ETFs indicating QQQ has a good reward to risk premium for investors. In addition, the ETF has one of the lowest expense ratios in comparison to other ETFs that are also tracking large-cap, growth indexes. This strong comparative advantage will be very attractive for QUMMIF and other non-institutional investors.


Fundamental AnalysisBusiness Cycle AnalysisSector9 1 Day 1 Week 1 Month 3 Month 6 Month 1 Year YTDTechnology -0.3 -1.4 4.6 1.7 0.6 5.9 6.3Healthcare -0.9 -2.8 2 -9.4 -7.3 4.2 2.9Consumer Goods -1 -2.8 1 -1.6 -4.4 3.2 2.9Services -0.8 -1.8 3 -1.7 -2.9 3.7 0.4Industrial Goods -1.2 -1.8 4 -0.7 -5.2 -0.4 -0.3Financial -1.3 -1.6 2.9 -4.7 -6.1 -2 -3.2Utilities -1.1 -2.9 -3.1 -5.1 -6.7 -6.5 -9.1Conglomerates -2.3 -4.7 -2.6 -3.1 -12.9 -17.9 -16.3Basic Materials -2 -5.9 -6.6 -9.3 -25.3 -27.8 -21.2

Technology, Consumer Goods and Healthcare sectors are outperforming right now indicating that we are in the mid/late bull phase of the business cycle. In fact, the Federal Reserve had announced that consumer borrowing had increased by $29.8 billion10 in September indicating an increase in domestic consumption in the US; the biggest monthly jump since 1941. As a result, if fundamentals hold, QQQ is likely to perform well since approximately 37% of the fund is made up of equity in the tech sector.

9 Table quotes are from 12/11/2015, at 12.55pm. Data extrapolated from http://www.finviz.com/groups.ashx


Stock Market

1. Technology ++2. Consumer Goods +3. Services +4. Healthcare +

Trough

1

2, 3

Business Cycle

Peak

http://www.finviz.com/groups.ashx

Market Breakdown

Communications34%

Consumer, Cyclical9%

Consumer, Non-cyclical19%

Industrial1%

Technology37%

QQQ US Equity Market Breakdown

Company breakdown

12.86

8

5.524.62

4.38

4.04

3.01

2.97

2.712.45 T o p 1 0 Ho ld in g s ( % )

APPLE INC

MICROSOFT CORP

AMAZON.COM INC

ALPHABET INC-CL C

FACEBOOK INC-A

ALPHABET INC-CL A

INTEL CORP

GILEAD SCIENCES INC

CISCO SYSTEMS INC

COMCAST CORP-CLASS A

10 http://www.nytimes.com/2015/11/07/business/economy/jobs-report-hiring-unemployment-october.html?_r=0 11 Refer to table 3 in Appendix.


http://www.nytimes.com/2015/11/07/business/economy/jobs-report-hiring-unemployment-october.html?_r=0

http://www.nytimes.com/2015/11/07/business/economy/jobs-report-hiring-unemployment-october.html?_r=0

Geographical Breakdown12

US 96%

QQQ U S E q u ity Ge o g ra p h ic a l B re a k d o wn

US

China

UK

Singapore

Netherlands

Israel

Switzerland

Seasonality Comparison13

January

February

March AprilMay

JuneJuly

August

Septem

ber

October

November*

December*

-1

0

1

2

3

4

5

6M o n th ly A v e ra g e T o ta l R e tu rn ( % )

QQQ US Equity Average Total Return (%)

According to the ETF’s average monthly performance, we would be looking for an entry during the November/December period and exit during the peak outperformances in February or October.

12 Refer to Table 1 in Appendix for exact figures of other regions.13 The months November and December only have 4 data points. Graph was produced in November 2015. Refer to Table 2 in Appendix.


Risk AssessmentVolatility

QQQ US EquityVOLATILITY_30D 14.76248153VOLATILITY_60D 26.16066906VOLATILITY_90D 22.82878523VOLATILITY_360D 16.39171763VOLATILITY MEAN 16.97030578

Sector and Company ConcentrationDue to the high concentration of the ETF in technology, communications and consumer non-cyclical sectors the ETF performance will be closely impacted by the performance in these sectors. In particular, the performance of Apple, Google, Amazon and Microsoft over the Christmas period will be important.

Market Risk

Macro Risk


QQQ US EquityEQY_BETA 0.999006152EQY_ALPHA -0.024428736EQY_RAW_BETA 0.998509228CORR_COEF 0.998719536STDDEV_ERROR 0.093072757BETA_T_TEST 199.3811356R^2(CORRELATION^2) 0.997510154NUMBER OF POINTS 104STD ERROR OF BETA 0.005005361

DatesProbability of

Move (%) 0-0.25 0.25-0.5 05-0.75 0.75-112/16/2015 68 32 68 - -01/27/2016 71.2 28.8 64.4 6.8 -03/16/2016 85 15 47.3 34.4 3.304/27/2016 87.7 12.3 41.5 36.8 8.906/15/2016 92.9 7.1 29.2 38.7 20.607/27/2016 94.4 5.6 24.4 36.7 24.609/21/2016 96.4 3.6 17.6 32.2 28.911/02/2016 97.3 2.7 14.1 28.6 29.7

Currency Risk

Currency GBP/USD

Spot Price14 0.65771 Month 0.6578443 Month 0.6576976 Month 0.6574651 year 0.6568582 year 0.655008

Risk also comes from the likelihood of an increase in interest rate in the US. All factors being equal, if interest rates increase, then the USD is likely to appreciate. The forward spot rates gives the implied future spot price, showing an appreciation in US dollar. So if we invest before the Fed increases interest rates, we could see gains from the currency conversion back into GBP.

14 Spot Prices as of 13/11/2015, Time: 5:34pm


Technical Analysis

Moving Averages

Nov 2014

Dec 2014

Jan 2015

Feb 2015

Mar 2015

Apr 2015

May 2015

Jun 2015

Jul 2015

Aug 2015

Sep 2015

Oct 2015

Nov 2015

85

90

95

100

105

110

115

120MA

QQQ US Equity 20 Day 50 Day100 Day

The Moving Averages helps us to subjectively look at movement of QQQ’s price without the sharp decline from Black Monday. It is clear that 50-Day MA is below the 100-Day and 200-Day MA curves indicating a bearish market in December.

Relative Strength Index

0

10

20

30

40

50

60

70

80

90RSI

QQQ US Equity RSIQQQ US Equity Overbought LineQQQ US Equity Oversold Line


MACD

Nov 2014

Dec 2014

Jan 2015

Feb 2015

Mar 2015

Apr 2015

May 2015

Jun 2015

Jul 2015

Aug 2015

Sep 2015

Oct 2015

Nov 2015

-2.5

-2

-1.5

-1

-0.5

0

0.5

1

1.5

2

2.5MACD

QQQ US Equity MACD DifferenceQQQ US Equity MACDQQQ US Equity MACD Signal

Bollinger Bands15

85

90

95

100

105

110

115

120Bollinger Bands

20 Day Moving AverageUpper BollingerLower BollingerQQQ US Equity

The Relative Strength Index indicates that the ETF has been overbought and suggests that the ETF is currently experiencing pull-back. The 50-day moving average line is below the 100-day and 200-day line which also indicates pressure in favour of the sell-side. MACD is showing mixed signals. On the one hand, the buy side looks like it could be losing momentum and on the other, it could continue to trend up in the short term.

15 Bollinger Bands drawn using 20 day moving average, and 2 standard deviations above and below the moving average.


Monte Carlo Simulation

Oct 2015 Dec 2015 Jan 2016 Mar 2016 May 2016 Jun 2016 Aug 2016 Oct 2016 Nov 2016110

115

120

125

130

135

140Monte Carlo Simulation

Using the Monte Carlo Simulation and applying the Geometric Brownian Motion (having the average and standard deviation of the time series prices for the last two years) we can see that there is a very strong uptrend. A long strategy will be very ideal given this bull market.

Fibonacci Retracement

Nov 2010 Nov 2011 Nov 2012 Nov 2013 Nov 2014 Nov 201540

50

60

70

80

90

100

110

120Fibbonacci Retracement

Fibonacci Level Price Colour100% 115.02 Red76.40% 99.6824 Grey61.80% 90.1938 Green50% 82.525 Light Blue38.20% 74.8562 Green23.60% 65.3676 Grey0% 50.03 Red


100%

76.4%

61.8%

50%

38.2%

23.6%

0%

The Bollinger Bands and the 20-Day moving average are strongly trending upwards indicating a strong buy signal and an upward trend in the price of the ETF.

Recommendations:52 Week High: 115.4752 Week Low: 84.74Support Level 1: 100.0026Support Level 2: 99.6824

Resistance Level 1: 115.02Resistance Level 2: 115.47Target Buy Price: between 100 and 110Target Sell Price: 130

Conclusion


Strong Returns

Diversification

Low Expense Ratio

Low Tracking Error

AppendixETFs have become very popular over the past 10 years. This is due to the relative performance of equity, bond and commodity markets. Gains in major US stock indexes and declining long term interest rates have made it relatively attractive for investors to access these markets; which includes buying ETFs that primarily tracks with an index.

Table 1Country Proportion (%)

US 95.87

China 1.48

UK 0.99

Singapore 0.63

Netherlands 0.49

Israel 0.28

Switzerland 0.13

Table 2

MonthAverage Total Return (%)

January 1.98

February 4.46

March 0.51

April 1.17

May 0.41

June -0.03

July 2.94

August -0.42

September -0.35

October 4.82

November* 1.68

December* -0.12


Table 3Market Breakdown Proportion (%)

Communications 34.146394

Consumer, Cyclical 9.069215

Consumer, Non-cyclical 18.610342

Industrial 0.942575

Technology 37.099202

Profitability of Top 10 Companies in Fund

Mar 2010 Mar 2011 Mar 2012 Mar 2013 Mar 2014 Mar 20150%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100% Profit Margin

AAPL US Equity MSFT US Equity AMZN US Equity GOOG US Equity FB US Equity

GOOGL US Equity INTC US Equity GILD US Equity CSCO US Equity CMCSA US Equity


Descriptions

Name TickerBenchmark Index Ticker Description

Powershares QQQ Trust Series 1 QQQ US XNDX

PowerShares QQQ™, formerly known as "QQQ" or the "NASDAQ- 100 Index Tracking Stock®", is an exchange-traded fund based on the Nasdaq-100 Index®. The Fund will, under most circumstances, consist of all of stocks in the Index. The Index

includes 100 of the largest domestic and international nonfinancial companies listed on the Nasdaq Stock Market based on market capitalization. The Fund and

the Index are rebalanced quarterly and reconstituted annually.

iShares Nasdaq Biotechnology IBB US XNBI

iShares Nasdaq Biotechnology ETF is an exchange-traded fund incorporated in the USA. The Fund's objective seeks investment results that correspond to the

performance of the Nasdaq Biotechnology Index. The Fund will concentrate its investments in companies primarily engaged in using biomedical research for the

discovery or development of new treatments or cures for human disease.

Direxion NASDAQ-100 Equal Weighted

Index Shares QQQE US NDXE

The Direxion NASDAQ-100® Equal Weighted Index Shares seeks investment results, before fees and expenses, that track the NASDAQ-100 Equal Weighted TR

Index. There is no guarantee the fund will meet its stated investment objective.

First Trust NASDAQ-100 Ex-Tech QQXT US NDXM

The First Trust NASDAQ-100 Ex-Technology Sector Index Fund is an exchange-traded index fund. The objective of the Fund is to seek investment results that

correspond generally to the price and yield (before the Fund's fees and expenses) of an equity index called the NASDAQ-100 Ex-Tech Sector IndexSM

PowerShares NASDAQ Internet

Portfolio PNQI US NETX

The PowerShares NASDAQ Internet Portfolio (Fund) is based on the NASDAQ Internet Index® (Index). The Fund will normally invest at least 90% of its total

assets in common stocks that comprise the Index. The Index is designed to track the performance of the largest and most liquid US-listed companies engaged in

internet-related businesses and that are listed on one of the major US stock exchanges. The Underlying Index employs a modified market capitalization-

weighted methodology based on the market capitalization ranking of the Underlying Index securities. The Fund and the Index are rebalanced and

reconstituted quarterly.

First Trust NASDAQ-100 Equal Weighted

Index Fund QQEW US NDXE

The First Trust NASDAQ-100 Equal Weighted Index Fund is an exchange-traded index fund. The investment objective of the Fund is to replicate as closely as

possible, before fees and expenses, the price and yield of the NASDAQ-100 Equal Weighted IndexSM

SPDR S&P 500 ETF Trust SPY US SPXT

SPDR S&P 500 ETF Trust is an exchange-traded fund incorporated in the USA. The ETF tracks the S&P 500 Index. The Trust consists of a portfolio representing all 500 stocks in the S&P 500 Index. It holds predominantly large-cap U.S. stocks. This ETF is structured as a Unit Investment Trust and pays dividends on a quarterly basis.

The holdings are weighted by market capitalization.


TickerLeverag

e

UK Reporting

Status

UCITS Complaint

Fund China QDII Fund ISIN SEDOLQQQ US No No No No US73935A1043 2402433IBB US No No No No US4642875565 2724892QQQE US No No No No US25459Y2072 B7F2946QQXT US No No No No US33733E4017 B1RMJQ4PNQI US No No No No US73935X1467 B39XXY5QQEW US No No No No US3373441050 B13HML9SPY US No - No No US78462F1030 2840215

References


http://www.finviz.com/

http://www.nytimes.com/

*Unreferenced graphs and tables have been imported from Bloomberg, and computed through excel.

Contributions:

Overview section completed by: Andy Voong

Fundamental Analysis completed by: Andy Voong

Risk Assessment completed by: Andy Voong and Mengyuan Tang

Technical Analysis completed by: Andy Voong

Presentation produced by Andy Voong

Research Team: Andy Voong, Mengyuan Tang and Hossein Goudarzi


http://www.finviz.com/


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Powershares QQQ Trust series 1